Indian economy continues to demonstrate resilience amid turbulent global environment: RBI

According to the RBI’s most recent monthly bulletin, the Indian economy is resilient in the current uncertain global environment, with strong sectoral performance and improving consumer trends supporting the growth momentum.

In a ‘State of the Economy’ report, RBI personnel noted that growing trade tensions and a heightened wave of uncertainty about the breadth, timing, and intensity of tariffs are putting the global economy’s resilience to the test.

“While engendering heightened volatility in global financial markets, these have also caused apprehensions about the slowdown in global growth.

“Amidst these challenges, the Indian economy continues to demonstrate resilience as evident in the robust performance of the agriculture sector and improving consumption,” said the authors.

They emphasized that India’s macroeconomic fundamentals remain solid, and economic growth is expected to continue, fueled by healthy domestic demand, stable investment activity, continuous policy-driven infrastructure construction, and an increase in government spending.

Despite the inherent strength based on strong macroeconomic fundamentals and careful policy, the authors cautioned that the repercussions of a turbulent external environment are apparent in numerous sectors of the economy.

They stated that sustained foreign portfolio withdrawals put severe pressure on domestic equity markets in February, resulting in currency depreciation.

Inflation Outlook

Going forward, India’s fundamental strengths—sound fiscal policies, a well-calibrated monetary framework, and digital transformation initiatives—are projected to lay the groundwork for long-term, sustainable economic growth.

Referring to the drop in headline CPI inflation to a seven-month low of 3.6% in February 2025 as a result of a further correction in food prices, staffers believe that the drop in overall inflation will further support consumption recovery and bolster macroeconomic strength, thereby mitigating external challenges.

The authors stated that strong kharif production, improved rabi sowing, higher reservoir levels, and a seasonal winter correction in vegetable prices bode well for food inflation, though volatility in commodity prices and weather anomalies remain potential upside risks to the overall inflation outlook.

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