RBI bulletin: Indian economy performed well despite global headwinds

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 buildup of inflationary pressures according to The Reserve Bank of Indias RBI latest bulletinIn its bulletin the RBI flagged the escalating geopolitical tensions and weatherrelated uncertainties as the key risksIn 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 financesDespite such a challenging global environment the Indian economy recorded a strong GDP growth in Q1202627 it saidIndias economy grew at 78 per cent during the first quarter ended June beating industry estimatesThe 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 buildup of inflationary pressures the bulletin saidIndias financial and external sectors are drawing strength from the real economy although geopolitical tensions and weatherrelated uncertainties are acting as key downside risks it addedRupee depreciationThe bulletin said that the Reserve Bank of Indias swap facility which mobilised inflows of USD 1364 billion led to a stronger rupee but the higher crude oil prices pared the gainsWest Asia tensions and high crude oil prices caused the Indian rupee to depreciate for most of August Strong FCNRB 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 saidThe RBI mobilised a record USD 12723 billion through Foreign Currency NonResident Bank or FCNRB deposits as of August 31Including overseas foreigncurrency borrowings OFCB worth USD 53 billion and external commercial borrowings ECB of USD 39 billion the total inflows under the measures reached USD 136377 billionWhile noting foreign exchange reserves reached record levels it said System liquidity remained in surplus following strong FCNRB deposit flows The resultant deposit growth could support ongoing credit growthInflationIndias consumer price index inflation had inched up to 48 per cent in August driven by the food and beverages group along with a pickup in fuel and core componentsOn inflation it said until September 21 highfrequency data suggest a broadbased sequential increase in food pricesAmong cereals rice and wheat prices continue to rise though the pace of monthonmonth increase moderated for ricePrices of all major pulses gram tur and moong inched up over the previous month Edible oil prices also registered a broadbased increase led by mustard and palm oil it saidAmong key vegetables onion prices increased sharply and tomato prices inched up after two months of moderation while potato prices recorded a monthonmonth declineFDI inflowsIt noted that Indias 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 statedForeign 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 nonresident deposits rose sharplyAccording to the article net FDI stood at USD 73 billion in July 2026 the highest monthly flow in five years reflecting robust gross inflows of USD 146 billion During AprilJuly 2026 net FDI and gross FDI inflows stood at USD 134 billion and USD 439 billion respectively as compared to USD 97 billion and USD 389 billion in the corresponding period last yearVarious capital flow measures announced in June supported the accumulation of foreign exchange reserves which rose to USD 7659 billion as on September 18 2026 Foreign portfolio investment FPIs registered net outflows in September after witnessing inflows in August on reescalation of the West Asia crisis and rising global bond yields it saidThe 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