RBI bulletin: Indian economy remains resilient amid global uncertainty; inflation eases, FDI inflows moderate

The Indian economy has demonstrated resilience despite global uncertainty and weak external demand, supported by “strong and durable macroeconomic fundamentals,” according to the Reserve Bank of India’s (RBI) October bulletin released on Monday. The bulletin’s article on the ‘State of the Economy’ highlighted that India’s growth momentum continues, with signs of revival in urban demand and robust rural consumption.“While the Indian economy is not immune to global headwinds, it has so far exhibited resilience, driven by a focus on strong and durable macroeconomic fundamentals, including low inflation, robust balance sheets of banks and corporates, adequate foreign exchange reserves and a credible monetary and fiscal framework,” the article said, as per news agency PTI.As per the RBI, headline consumer price index (CPI) inflation moderated sharply in September, marking its lowest reading since June 2017. However, high-frequency data up to October 17 indicated a rise in cereal prices. Among pulses, prices of gram dal, tur/arhar dal and moong dal moderated, while edible oil prices firmed up for mustard, sunflower, and palm oil. Tomato, onion and potato prices softened significantly, particularly for tomatoes.Citing the Monetary Policy Committee’s (MPC) October 1 resolution, the bulletin said the growth outlook remains resilient, driven by domestic factors despite external headwinds. “Domestic structural reforms are helping to somewhat offset the drag on growth from the weakening external demand conditions,” it added.The RBI noted that the current macroeconomic conditions have created space for policies aimed at further supporting growth. However, it cautioned that the rupee depreciated against the US dollar in September amid elevated trade tensions, global uncertainties and persistent foreign portfolio investment (FPI) outflows.As per PTI, net FPI flows remained negative for the third consecutive month due to equity outflows linked to weak investor sentiment over US tariffs and higher H-1B visa fees. The bulletin also mentioned that gross inward foreign direct investment (FDI) moderated in August, with Singapore, Cayman Islands, UAE, the Netherlands, and the US accounting for over three-fourths of total inflows. Manufacturing, computer services, construction, and financial services emerged as the top recipient sectors.However, RBI clarified that the views expressed in the bulletin are those of the authors and do not represent the official stance of the central bank.