India stands well-positioned to navigate ongoing global headwinds: RBI Bulletin
Amidst global uncertainty when the global economic outlook remains clouded amidst shifting policy landscapes and lingering vulnerabilities the outlook for India is one of 'cautious optimism' said Reserve Bank of India official in the May edition of RBI Bulletin.
'According to IMF projections of April 2025, India is projected to remain the fastest growing major economy in 2025 and is likely to surpass Japan this year to become the world's fourth largest economy,' they said in the State of the Economy article.
'Inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26. The prospects of bumper rabi harvest and the outlook of an above normal monsoon would further strengthen rural consumption and is also likely to keep food inflation in check. Consumers and businesses remain confident, supportive for a strengthening of economic activity,' they stated.
They emphasised that the Indian economy continued to be ring-fenced by stability encompassing monetary, financial and political stability; policy consistency and certainty; congenial business environment; and strong macroeconomic fundamentals along with a policy ecosystem that is transparent, rule-based, and forward-looking.
'In the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a 'connector country' that can become a key intermediary in sectors such as technology, digital services and pharmaceuticals,' they stated.
In this scenario, the recent completion of free trade agreement with UK points to a strengthening of bilateral trade linkages, they pointed out.
'Going forward, notwithstanding the daunting challenges in the horizon, India stands well-positioned to navigate the ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth,' they stated.
They said during the month the Indian rupee moved within a narrow range and exhibited lower volatility compared to peer economies.
But the escalation of tensions between India and Pakistan rendered financial markets 'volatile with India VIX seeing a substantial jump', they stated.
'Domestic financial markets sentiments witnessed a turnaround thereafter amidst easing India-Pakistan tensions, an improvement in the global trade scenario, and softer domestic inflation,' the officials wrote in the article.
'Amidst uncertainties on global capital flows, it is noteworthy that domestic institutional investors (DIls) have surpassed FPIs in ownership of Nifty-500 companies in March 2025. This marks a structural shift in Indian equity markets as DIls, including mutual funds and insurance companies, increasingly offset the volatility caused by FPIs, with retail and systematic investment plan (SIP) flows providing a steady long-term investment base,' they pointed out.
The measures undertaken by the Reserve Bank since January 2025 have significantly eased liquidity conditions and calmed financial markets, they highlighted.
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