26 September,2026 01:30 PM IST | Mumbai | mid-day online correspondent
Reserve Bank of India. File pic.
Indian economy has performed well despite the global challenges, while the renewed conflict between US and Iran has led to a sharp increase in crude oil prices and reignited concerns over supply disruptions and build-up of inflationary pressures, according to The Reserve Bank of India's (RBI) latest bulletin.
In its bulletin, the RBI flagged the escalating geopolitical tensions and weather-related uncertainties as the key risks.
In its State of Economy article, it noted the global economy continues to be plagued by geopolitical tensions, trade fragmentation, disruptions in energy supplies, and generalised cost pressures, which are weighing on the financial markets and business confidence. Besides, it noted that the rise in sovereign yields in some of the major advanced economies has put pressure on government finances.
"Despite such a challenging global environment, the Indian economy recorded a strong GDP growth in Q1:2026-27," it said.
India's economy grew at 7.8 per cent during the first quarter ended June, beating industry estimates.
"The escalation of conflict in West Asia in September has led to a sharp increase in crude oil prices, reigniting concerns of a further disruption in global supply chains and build-up of inflationary pressures," the bulletin said.
"India's financial and external sectors are drawing strength from the real economy, although geopolitical tensions and weather-related uncertainties are acting as key downside risks," it added.
The bulletin said that the Reserve Bank of India's swap facility which mobilised inflows of USD 136.4 billion led to a stronger rupee but the higher crude oil prices pared the gains.
"West Asia tensions and high crude oil prices caused the Indian rupee to depreciate for most of August. Strong FCNR(B) deposits led to brief recoveries in early September, but these gains reversed in the later part of the month on account of higher crude oil prices," it said.
The RBI mobilised a record USD 127.23 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits, as of August 31.
Including overseas foreign-currency borrowings (OFCB) worth USD 5.3 billion and external commercial borrowings (ECB) of USD 3.9 billion, the total inflows under the measures reached USD 136.377 billion.
While noting foreign exchange reserves reached record levels, it said, "System liquidity remained in surplus, following strong FCNR(B) deposit flows. The resultant deposit growth could support ongoing credit growth."
India's consumer price index inflation had inched up to 4.8 per cent in August, driven by the food and beverages group along with a pickup in fuel and core components.
On inflation, it said, until September 21, high-frequency data suggest a broad-based sequential increase in food prices.
Among cereals, rice and wheat prices continue to rise, though the pace of month-on-month increase moderated for rice.
"Prices of all major pulses, gram, tur and moong inched up over the previous month. Edible oil prices also registered a broad-based increase, led by mustard and palm oil," it said.
Among key vegetables, onion prices increased sharply, and tomato prices inched up after two months of moderation, while potato prices recorded a month-on-month decline.
It noted that India's economy demonstrated resilience through August, and supported by strong export growth, the merchandise trade deficit narrowed. The current account deficit remained moderate in the first quarter of the financial year, supported by robust services exports and remittance flows, it stated.
Foreign direct investment (FDI) flows strengthened in July with net FDI reaching its highest monthly level in five years, the article said, adding that net inflows under non-resident deposits rose sharply.
According to the article, net FDI stood at USD 7.3 billion in July 2026, the highest monthly flow in five years, reflecting robust gross inflows of USD 14.6 billion. During April-July 2026, net FDI and gross FDI inflows stood at USD 13.4 billion and USD 43.9 billion, respectively, as compared to USD 9.7 billion and USD 38.9 billion in the corresponding period last year.
"Various capital flow measures announced in June supported the accumulation of foreign exchange reserves, which rose to USD 765.9 billion as on September 18, 2026. Foreign portfolio investment (FPI)'s registered net outflows in September, after witnessing inflows in August, on re-escalation of the West Asia crisis and rising global bond yields," it said.
The apex bank said the views expressed in the bulletin article are those of the authors and do not represent the views of the Reserve Bank of India.
