Strong Reforms, Stable Macros to Keep India on High Growth Path Despite Global Uncertainty: RBI

On financial markets, the RBI stated that stock markets remained bullish for most of the year, primarily due to optimism about global Big Tech companies. However, in recent months, concerns about high valuations have led to some degree of risk aversion in the markets. Additionally, portfolio investment in emerging markets has also slowed.

The report, citing the Monetary Policy Committee meeting held on December 5, stated that India's economic growth forecast for 2025-26 has been raised by 50 basis points to 7.3 percent, from 6.8 percent in the October review. Meanwhile, the CPI inflation forecast for the same period has been revised down by 60 basis points to 2.0 percent.

High-frequency economic indicators for November indicate that domestic economic activity remains robust and demand conditions remain strong. While headline CPI inflation increased slightly, it remained below the lower tolerance limit. Financial conditions remained favorable, and credit flow to the commercial sector remained stable.

The RBI also stated that India's current account deficit narrowed in the second quarter of 2025-26 compared to the same period last year. This was driven by a narrowing of the merchandise trade deficit, strengthening services exports, and continued robust remittances from NRIs. Overall, the report concludes that India is well positioned to maintain strong economic growth even amid global challenges.