Strong macro fundamentals, policy interventions anchor Indian economy against global headwinds: RBI

The Reserve Bank of India RBI Bulletin on Friday said the Indian economy has remained resilient amid the global challenges including the renewed geopolitical conflict in West Asia and trade uncertaintiesThe Indian economy continues to grow at a high rate despite a challenging global environment characterised by geopolitical conflicts high and volatile crude oil prices trade policy related uncertainties and tighter global financial conditions it saidThe RBIs October Bulletin noted that domestic demand remained strong in September with retail automobile sales in both urban and rural areas pickingup sharply partially due to base effect It noted that the recovery in tractor sales alongside sustained momentum in twowheeler sales indicated a robust rural demandIt further said that GST revenue recorded doubledigit growth for the fourth consecutive month in SeptemberThe Indian economy has been anchored by solid macroeconomic fundamentals and policy interventions to cushion downside risks Despite being a net energy importer GDP growth has been supported by sustained domestic demand and services it saidIndia had registered a GDP growth of 78 per cent in the first quarter of the fiscal year beating industry estimatesGlobal economy going through a rough phaseThe article on State of the Economy noted that the global economy is currently passing through a rough phase with multiple shocksAlthough IMF International Monetary Fund has revised upwards the global economic outlook for 2026 and 2027 the prospect remains clouded by significant downside risks it saidIt flagged the rising inflationary pressures due to the West Asia crisis and recurrent trade tensions alongside multidecadehigh sovereign bond yields elevated public debt and broader fiscal sustainability as the risksInflationary pressuresWhile stating that the Indian economy is navigating this challenging environment it noted that the headline inflation has been on the upward trajectory over the last few months is increasingly getting broadbasedCPI inflation edged up over the months and showed signs of greater generalisation across commodities calling for a commensurate change in the monetary policy stance it saidThe headline Consumer Price Index CPI inflation increased to 55 per cent in September driven by broadbased increase in food fuel and core components Core excluding food and fuel inflation inched up to 43 per cent Core inflation excluding precious metals also increased to 32 per centThe RBI had increased its benchmark lending rate or repo rate by 25 basis points to 55 per cent in October to curb the rising inflationRBIs forex intervention helping rupeeThe external headwinds are also being dealt with a slew of regulatory measures by the Reserve Bank to curb speculative activity in foreign exchange market Strong inflows under FCNRB swap window augmented reserves it saidIt said the domestic currency exhibited a depreciating bias till early October until the Reserve Bankrsquos measures to curb speculative activity in the forex marketThe RBI on October 10 announced several measures aimed at reducing immediate dollar demand and curbing excessive positions in the foreign exchange marketIt created a special window for oil marketing companies which will take the dollar demand away from the spot market and tightened rules governing forex derivatives trades to curb speculative bets against the rupeeIn addition it asked banks to create a 20 per cent reserve for dollar purchases of over USD 2 millionThe RBI clarified that the views expressed in the Bulletin article are those of the authors and do not represent the views of the central bank