Indian Economy Shows Resilience Amid Global Headwinds: RBI
New Delhi, October 23: India's economy is drawing support from solid macroeconomic foundations and policy measures designed to limit the damage from external risks, the Reserve Bank of India said in its October 2026 monthly bulletin on Friday. The assessment comes at a time when global uncertainties remain elevated.
The central bank said high-frequency data from the industry and services sectors show that the domestic economy is performing steadily. Even though India is a major net importer of energy, GDP growth has been sustained by continued domestic demand and the services sector.
The bulletin pointed out that retail inflation has inched higher in recent months and that price increases are becoming more widespread across different commodities. It said the monetary policy stance needs to be adjusted in line with this trend. The RBI has also introduced several regulatory steps to discourage speculative activity in the foreign exchange market as it deals with external pressures.
According to the bulletin, robust capital inflows under the FCNR(B) swap facility supported a rise in foreign exchange reserves. Inflows of foreign direct investment, external commercial borrowings and remittances also grew stronger in August. A sharp rise in exports helped reduce the trade deficit in September.
The monthly report noted that retail inflation based on the Consumer Price Index increased in September, mainly because of higher food and fuel prices and a broad rise in core inflation components.
During the first six months of fiscal 2026-27, merchandise exports grew by double digits, which helped bring down the trade gap, the bulletin said. It also stated that strong capital flows through the FCNR(B) swap window added to the reserves.
On the supply side, manufacturing recorded strong growth. Services activity became more vigorous as domestic and overseas demand picked up. Despite a deficient southwest monsoon with uneven distribution, kharif sowing was completed and the overall sown area was higher than normal.
The rupee gained strength after coming under pressure until early October, with the RBI's measures to curb speculation in the currency market providing support.
ECB activity picked up during April-August 2026, with improvements in both registrations and net capital inflows compared with the previous year. The bulletin said adequate foreign exchange reserves kept sensitivity indicators of the external sector under control.
India's economy has handled global shocks effectively. The IMF has raised its FY2026-27 growth estimate for India by 60 basis points to 7 per cent from its July forecast. The fund cited better-than-expected economic momentum, strong domestic demand and dynamic services sector activity as the key reasons.