What makes India’s economy resilient to global turmoil? RBI breaks it down in October bulletin

The Indian economy continues to demonstrate resilience amid heightened global uncertainty, supported by strong domestic fundamentals and policy reforms, the Reserve Bank of India (RBI) bulletin said on Monday.

The monthly 'State of the Economy' article, published in the RBI bulletin, noted that global uncertainty has edged up with rising trade and policy risks in major economies, particularly the United States.

While global growth broadly held up in the first half of 2025, it remains uneven, and the International Monetary Fund’s (IMF) latest projections indicate a slowdown compared to last year.

“Despite heightened uncertainties, global growth, aided by transitory factors, broadly held up in H1:2025,” the RBI said, adding that financial markets remained largely buoyant on optimism surrounding Big Tech stocks and monetary easing by the US Federal Reserve.

The article said India’s growth momentum remained steady, backed by strong urban and rural demand, robust agricultural output, and continued government capital expenditure.

"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.

The central bank also highlighted that major international agencies, including the IMF, OECD and World Bank, have revised India’s growth forecast upwards for the current fiscal year.

Headline inflation in September fell sharply to its lowest level since June 2017, remaining below the target for the eighth consecutive month.

The RBI said financial conditions remained benign in October, with adequate liquidity and stable yields. Foreign portfolio flows, which turned negative in September, saw renewed inflows in October.

The central bank cautioned that the global economic landscape remains in flux amid rising protectionism and fiscal risks in advanced economies.

“The state of flux of the global economy and policies present considerable uncertainties to the macroeconomic outlook,” the RBI said.

It added that while India is not immune to external headwinds, its economy has so far exhibited resilience, supported by low inflation, robust balance sheets of banks and corporates, adequate foreign exchange reserves, and a credible policy framework.

“The growth outlook remains resilient, supported by domestic drivers, despite uncertainties on the external front,” the RBI said, adding that current macroeconomic conditions have opened up policy space for further supporting growth.

The RBI said the views expressed in the bulletin article are of the authors and do not represent the views of the Reserve Bank of India.