RBI Bulletin says Indian economy remains resilient but global risks are rising

India’s economy remains resilient despite a worsening global backdrop, with strong growth, robust services exports, FDI inflows and record foreign exchange reserves helping cushion the impact of geopolitical tensions and tighter global financial conditions, the Reserve Bank of India said in its September Bulletin.But the risks are becoming harder to ignore.West Asia raises the heatThe escalation of the West Asia conflict in September has pushed up crude oil prices sharply, raising the prospect of fresh supply-chain disruptions and renewed inflationary pressures. Rising sovereign bond yields in some major advanced economies are also putting pressure on government finances, while weather-related uncertainties remain another downside risk, the RBI said in its State of the Economy article.For now, the domestic economy is providing a buffer. India’s GDP grew 7.8% in the first quarter of 2026-27, while high-frequency indicators showed the economy remained resilient through August.Strong external buffers offer some cushionThat strength is also visible in the external sector. The current account deficit remained moderate in the first quarter, supported by robust services exports and remittance flows. Net FDI strengthened in July to its highest monthly level in five years, while inflows under non-resident deposits also rose sharply.Foreign exchange reserves climbed to an all-time high of $765.9 billion as of September 18, helped by capital-flow measures announced in June, the RBI said.The financial system has also continued to absorb the global volatility. System liquidity remained in surplus in August and rose further in the first half of September as banks tapped the RBI’s foreign currency non-resident (Bank), or FCNR(B), swap facility. Liquidity subsequently moderated because of tax-related outflows.Credit growth maintained its momentum while deposit growth picked up, and money supply growth accelerated in August on the back of faster growth in aggregate deposits.Markets feel the global pressureIndian equities remained subdued in August and September as geopolitical tensions and elevated global bond yields weighed on investor sentiment. Foreign portfolio investors also turned net sellers in September after recording inflows in August, with the renewed West Asia crisis and rising global bond yields cited as factors.Inflation is another area to watch.High-frequency data up to September 21 pointed to a broad-based sequential increase in food prices, the RBI said. Rice and wheat prices continued to rise, while prices of major pulses and edible oils also increased.On vegetables, onion prices rose sharply and tomato prices picked up after two months of moderation, although potato prices declined.Credit and investment remain supportiveThe Bulletin also carried an article examining the rise in the banking system’s credit-deposit ratio above 80%. It said the ratio does not, by itself, indicate funding vulnerability, as banks have been able to support credit growth through changes in their liabilities, capital and asset composition.Another article said private corporate investment showed signs of strengthening in 2025-26. The project pipeline suggests envisaged private-sector capital expenditure could reach ₹3.2 lakh crore in 2026-27, pointing to continued investment momentum.Taken together, the RBI’s assessment is one of an economy still being supported by strong domestic fundamentals, even as external shocks are becoming more pronounced.The RBI clarified that the views expressed in the Bulletin’s articles are those of the authors and do not represent the central bank’s views.Also Read: India, Liberia launch new global initiative on seafarer safety

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