RBI: India’s financial, external sectors remain strong
Mumbai: The Reserve Bank of India's latest Bulletin highlights that India's financial and external sectors continue to thrive despite global challenges. The article states that while geopolitical tensions and weather uncertainties pose significant risks, the domestic economy's resilience remains a strong foundation. The escalation of conflict in West Asia in September caused crude oil prices to soar, raising concerns about potential disruptions in supply chains and inflation.
Additionally, higher sovereign yields in advanced economies have put pressure on government finances.
Despite these challenges, India's economy grew strongly in Q1:2026-27. The financial and external sectors continue to draw strength from the real economy. System liquidity remained in surplus in August, peaking in September due to increased bank usage of the Reserve Bank's Foreign currency non-resident (Bank) [FCNR(B)] swap facility. However, the surge in money supply growth slowed down later in the month due to tax-related outflows.
In the same period, credit growth remained robust, while deposit growth accelerated. Indian equity markets faced subdued sentiment due to geopolitical tensions and elevated bond yields. The current account deficit stayed moderate in Q1:2026-27, buoyed by strong services exports and remittance flows. Foreign direct investment (FDI) flows increased in July, reaching the highest monthly level in five years. Net FDI inflows were the highest in five years, and non-resident deposit inflows surged.
Foreign portfolio investment (FPI) experienced net outflows in September, following a rise in West Asia crisis-related concerns and higher global bond yields. Inflation concerns persisted, with high-frequency data indicating a broad-based increase in food prices from September 21. Rice and wheat prices continued to rise, while major pulses' prices also increased. Edible oil prices rose, particularly for mustard and palm oil, while onion prices surged, and tomato prices inched up after a period of decline.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
