Page 4 - FIPI - Policy Economic Report - May 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Executive Summary

Gross domestic product in the Organization for Economic Cooperation and Development (OECD) region
rose by 0.1% in the first quarter of 2025, significantly down from an 0.5% rise in the previous quarter,
according to provisional estimates released by OECD. The overall GDP growth rate also slowed for the
G7 in Q1 2025, from 0.4% to 0.1%, reflecting a mixed picture among G7 countries. GDP contracted in
Japan and the United States, from 0.6% in both countries to -0.2% and -0.1%, respectively.

In case of India, according to the mid-year update of UN’s World Economic Situation and Prospects,
India’s growth is projected at 6.3 per cent in the current fiscal year, the highest among large economies.
This momentum is expected to continue into 2026, with growth estimated at 6.4 per cent. According to
the report, India’s growth is being driven by strong domestic demand and consistent government
spending. These factors have supported stable employment and helped contain inflation, which is
expected to fall within the Reserve Bank of India’s target range. Manufacturing activity is picking up,
helped by favorable policies and resilient external demand. Exports, especially in strategic areas like
defense production, are expanding steadily. Together, these indicators show that India’s economy is not
only holding firm but also making headway in an uncertain global environment.

Headline inflation-: Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the
month of April, 2025 over April, 2024 is 3.16% (Provisional). There is decline of 18 basis points in
headline inflation of April, 2025 in comparison to March, 2025. It is the lowest year-on-year inflation
after July, 2019.

Food Inflation: Year-on-year inflation rate based on All India Consumer Food Price Index (CFPI) for the
month of April, 2025 over April, 2024 is 1.78% (Provisional). Corresponding inflation rate for rural and
urban are 1.85% and 1.64%, respectively. A sharp decline of 91 basis point is observed in food inflation
in April, 2025 in comparison to March, 2025. The food inflation in April, 2025 is the lowest after October,
2021.

The HSBC Flash India Composite Output Index – a seasonally adjusted index that measures the month
on-month change in the combined output of India's manufacturing and service sectors registered 61.2 in
May 2025, up from 59.7 in April. This marks the strongest month-on-month growth since April 2024,
driven largely by gains in the services sector. The Services PMI Business Activity Index climbed to 61.2 in
May from 58.7 in April, indicating the fastest pace of growth in 14 months. Strong domestic and
international demand, along with technology investments and capacity expansion, are attributed as the
key drivers.

On the external front, India's total foreign exchange (forex) reserves dropped to $685.7 billion as of 16
May 2025. This drop comes after the forex reserves hit a 7-month high in the first week of May 2025.

As far as oil and gas industry is concerned, oil prices resumed their downward trajectory in late April and
early May, as trade tensions weighed on financial and commodity markets, and OPEC+ agreed to further

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