Mumbai: Coordinated fiscal, monetary and regulatory policies have helped build resilience in the economy, which is not fully immune to the external sector headwinds, said a Reserve Bank bulletin released on Monday.
Continued focus on macroeconomic fundamentals and economic reforms should help unlock efficiencies and productivity gains to firmly keep the economy on the high-growth trajectory amidst a fast-changing global environment, said an article published in the RBI’s December Bulletin.
The year 2025 brought about an unprecedented shift in global trade policies, marked by a move towards bilateral renegotiations on tariffs and terms of trade, it said.
Its ripple effects on global trade flows and supply chains are still unfolding. This has led to heightened global uncertainties and concerns about the prospects for global growth, said the article on state of the economy. “The Indian economy was not fully immune to the external sector headwinds. Coordinated fiscal, monetary and regulatory policies have helped to build resilience over the year,” it said.
The article said the Indian economy, supported by resilient domestic demand in Q2:2025-26, grew at its fastest pace in the last six quarters.
High-frequency indicators for November suggest that overall economic activity has held up with demand conditions remaining robust. Headline CPI inflation edged up but continued to remain below the lower tolerance level.
Further, financial conditions remained benign, and the flow of financial resources to the commercial sector remained robust, the article said.
India’s current account deficit moderated in Q2:2025-26 over the same period last year, supported by a lower merchandise trade deficit, robust services exports, and strong remittance receipts. “Bolstered by strong domestic demand, the economic growth has been robust. Benign inflation outlook provided adequate space for monetary policy to support growth,” the article said.
The article also said that during April-October 2025, FDI remained higher than last year both in gross and net terms.
Gross inward FDI remained steady in October with Singapore, Mauritius and the US accounting for more than 70 per cent of total FDI inflows.
However, net FDI was negative in October, mainly due to high repatriation and outward FDI. On the other hand, during 2025-26 so far (up to December 18), net FPI registered outflows, driven by equity segment.
FPI flows turned negative in December following inflows in the previous two months.
“The uncertainty surrounding the India-US trade deal and investors’ caution around high domestic valuations kept net FPI flows to India muted in recent months,” the article said.
Also, the Indian rupee (INR) depreciated against the US dollar in November, pressured by the strengthening of the US dollar, muted foreign portfolio flows, and uncertainty surrounding the India-US trade deal. The volatility of INR, as measured by the coefficient of variation, moderated in November from a month ago and remained relatively lower than most major currencies. In December so far (up to 19), the INR depreciated by 0.8 per cent over its end-November level.
According to data provided in the Bulletin, the Reserve Bank net sold $11.87 billion in the forex market in October to arrest the rupee slide against the greenback.
According to the data on operations in the onshore/offshore OTC segment, the RBI sold $29.56 billion and purchased $17.68 billion in October.
The data also showed that the central bank’s outstanding net forward sales stood at $63.6 billion in October, as against 59.4 billion at the end of September.