India’s economy remains resilient despite global volatility: RBI bulletin

Mumbai — The Indian economy continues to show strong resilience despite rising global uncertainty triggered by the ongoing Iran–Israel conflict and fresh trade actions by the United States, according to the latest monthly bulletin from the Reserve Bank of India.

The bulletin highlights that the second advance estimates of GDP for 2025–26 point to sustained economic strength, supported by robust domestic demand, steady investment activity, and strong macroeconomic fundamentals. India’s growth remained particularly impressive in the third quarter, registering 7.8 per cent.

Recent high-frequency indicators suggest that economic momentum picked up further in February. However, retail inflation saw a slight rise, mainly driven by food and beverage prices. On the financial side, liquidity conditions remained comfortable, and credit flow to the commercial sector increased through both banking and non-banking channels. India’s foreign exchange reserves were also deemed sufficient to cushion external shocks.

Globally, the situation remains volatile. The Middle East conflict has raised serious concerns around energy security, particularly after disruptions in key oil routes like the Strait of Hormuz. At the same time, new US trade investigations have added uncertainty to global supply chains and tariff regimes.

The RBI noted that prolonged geopolitical tensions could weigh on the global economy, which was already facing instability. Commodity markets have been hit hard, with oil, natural gas, and fertiliser supplies disrupted. The International Energy Agency has termed the current situation as one of the largest supply disruptions in oil market history. Brent crude prices surged sharply, rising from $78 to over $112 per barrel in March.

Despite these global headwinds, India’s economic fundamentals remain strong. The country has diversified its crude oil import sources and strengthened domestic refining capacity, helping mitigate risks. Policy measures have also been implemented to manage fuel supply disruptions and optimise domestic resources.

The bulletin suggests that creating an Economic Stabilisation Fund could further strengthen India’s ability to respond to external shocks.

Domestically, demand remained buoyant across both urban and rural markets, supported by tax relief measures, strong agricultural output, and seasonal factors like the wedding period. Sectors such as automobiles saw record sales in February, while agriculture continued its strong performance, with foodgrain production expected to reach a record high in 2025–26.

Globally, financial markets have reacted sharply to the energy shock. Equity markets declined, especially in energy-importing regions across Europe and Asia. Bond yields in the US hardened, while emerging market currencies weakened amid rising risk aversion. The US dollar, meanwhile, strengthened as investors moved towards safe-haven assets.

In this uncertain environment, major central banks have largely held interest rates steady, signalling caution as they navigate the evolving global landscape, the RBI bulletin noted.

With inputs from IANS