In speeches and articles published in the RBI’s Bulletin on Friday, Governor Sanjay Malhotra said the global financial system was passing through a period of “elevated uncertainty and challenges” with implications for both economic activity and financial markets.
Also Read: India’s forex reserves fall by $8.09 bn to $688.89 bn as of May 15
The governor said geo-economic fragmentation caused by tariffs, trade restrictions and industrial policies was reshaping global supply chains and affecting global capital flows. He also warned that persistently high public debt in major economies, stretched valuations in certain asset classes and rapid expansion of private credit markets were emerging risks to financial stability.
Malhotra further said the recent escalation of geopolitical tensions in West Asia had sharply raised energy prices amid damage to energy infrastructure and disruptions in supply chains. If the crisis persists, it could trigger broader inflationary pressures, he cautioned.
Against this backdrop, the RBI said India continued to demonstrate resilience across five key macroeconomic fronts — economic growth, inflation management, fiscal consolidation, banking sector stability and the external account.
The central bank noted that India has remained among the fastest-growing major economies since the pandemic, recording average growth of 8.2 per cent during 2021-25. The economy is estimated to have grown by 7.6 per cent in 2025-26, while growth for 2026-27 is projected at 6.9 per cent.The RBI said domestic demand remained supported by strong consumption and public investment, with the government’s capital expenditure push helping crowd in private investment and improve productive capacity.
On inflation, the central bank said headline retail inflation had remained below the 4 per cent target in the recent period, aided by the flexible inflation targeting framework that has helped anchor inflation expectations and reduce volatility. The RBI has projected average CPI inflation at 4.6 per cent for FY27.
The Bulletin also highlighted improvement in banking and NBFC balance sheets, with gains in capital adequacy, asset quality and profitability. Corporate balance sheets have strengthened as well, while fundraising through corporate bond markets has remained robust over the last two years.
Also Read: Indian banking system robust despite West Asia crisis, falling forex reserves: Experts
On the external front, the RBI said India’s foreign exchange reserves remained comfortable with import cover of around 11 months, while the current account deficit remained sustainable despite pressure from elevated energy prices.
The central bank also said strong gross foreign direct investment inflows and recent trade agreements were expected to support the external sector going forward.