Page 7 - Policy & Economic Report - July 2025

POLICY AND ECONOMIC
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cent while continuing to support growth alongside its commitment to maintaining price stability and
financial stability.

India's external sector remained resilient despite persistent global uncertainties. Merchandise and
services exports continued to register healthy growth, supported by strong performance in engineering
goods, electronics, chemicals, gems and jewellery and business services. Non-petroleum exports
remained robust, highlighting the increasing diversification and competitiveness of India's manufacturing
sector. Meanwhile, foreign exchange reserves remained at comfortable levels, providing an important
buffer against external shocks and reinforcing confidence in India's macroeconomic fundamentals. The
issue also highlights recent policy initiatives aimed at strengthening export competitiveness, attracting
foreign exchange inflows and enhancing long-term external sector resilience.

Overall, while geopolitical tensions, energy market volatility and trade uncertainties continue to present
challenges to the global economy, India's strong macroeconomic fundamentals, ongoing structural
reforms, sustained infrastructure investment and expanding manufacturing and services sectors position
the country favourably to sustain robust economic growth over the medium term. Continued policy
support, digital transformation, industrial diversification and investment in strategic sectors are expected
to further strengthen India's role as a leading driver of global economic growth.

As far as oil and gas industry is concerned, benchmark crude oil prices continued their downward
trajectory in June, driven by the interim ceasefire agreement between the United States and Iran, which
facilitated a significant recovery in oil flows through the Strait of Hormuz. North Sea Dated crude prices
declined by approximately US$31/bbl during the month, reaching US$68/bbl by early July, the lowest level
since January and approximately US$2/bbl below pre-conflict levels. However, the escalation in hostilities
on 7–8 July has introduced renewed uncertainty into the market outlook and could disrupt current
forecasts that anticipate the market shifting into a surplus next year.

Following the United States' temporary easing of restrictions on Iranian exports and the provision of
security support for non-Iranian shipments, tankers delayed in the Strait of Hormuz resumed their transit.
Consequently, total Gulf oil exports, including volumes transported through alternative routes bypassing
the Strait, increased by 6.5 mb/d in June to 16.1 mb/d. While this represents a substantial month-on-
month increase, export volumes remained significantly below the 24 mb/d average recorded prior to the
onset of the conflict.

Crude oil and condensates accounted for approximately 85% of the monthly increase, supported by the
drawdown of floating storage and onshore inventories that had previously reached near-capacity levels.
As a result, Gulf oil production increased by a comparatively more modest—but still significant—3.5 mb/d,
although production remained 11.4 mb/d below pre-conflict levels.

Hedge funds and other money managers closed a large volume of speculative long positions in June, with
the selling being more pronounced in the ICE Brent futures market. Between late May and the week of 30
June, hedge funds and other money managers sold an equivalent of 245 mb across Brent and WTI futures

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