India’s economy is expected to remain resilient in the face of rising global uncertainties, supported by strong domestic fundamentals, according to the Reserve Bank of India’s latest bulletin. The central bank said India’s robust macroeconomic framework, moderating inflation, and strong growth engines will help the country weather external risks including tariff uncertainties and global financial volatility.
In the near-term, the RBI noted that the global growth outlook “remains downcast,” citing the uncertainty surrounding tariffs and divergent policy responses from countries. These factors, it said, “could result in lower investment spending, subdued consumer confidence, and a slowdown in global trade.”
“Going forward, global financial conditions are likely to remain volatile and EMEs are vulnerable to feedback loops and spillovers which may lead to reigniting of global inflation,” the bulletin warned. While a decline in global commodity prices could ease inflationary pressure in commodity-importing nations, the RBI noted that “currency pressures could partly offset such benefits.”
Momentum to continue
Despite these challenges, India’s economic momentum is expected to continue. “India’s strength to withstand these headwinds stem from its robust growth fostered by a strong macroeconomic framework and moderating inflation, with strong domestic engines of growth,” the RBI said.
The agricultural sector is set to sustain its momentum, helped by favourable harvests and a healthy reservoir position. “The agricultural sector in India is poised to sustain its momentum, supported by bumper kharif and rabi harvest and higher summer sowing amidst comfortable reservoir position.” However, risks from rising temperatures and the possibility of heatwaves “need to be monitored.”
Industrial and services activity also remain resilient. A survey conducted among industry bodies, credit rating agencies, and banks “reveal optimism in economic activity supported by moderating inflation, sustained upswing in rural consumption and recovery in urban consumption.”
At the same time, the RBI cautioned that “global uncertainties, however, act as downside risks to this outlook.”
On a longer-term horizon, the central bank pointed to India’s opportunities from global shifts. “Going forward, India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages.”
India’s strength in services exports and remittances continues to serve as a buffer for the current account. The RBI added, “Calibrated policy support can help India turn global volatility into an opportunity and strengthen its position in the emerging world economic landscape.”
