Andalib Akhter
The Reserve Bank of India (RBI) on Monday said that the Indian economy recorded its fastest growth in the last six quarters in Q2 of 2025-26, driven by resilient domestic demand, even as global uncertainties continued to ease from elevated levels.
In its latest monthly bulletin on the State of the Indian Economy, the RBI noted that high-frequency indicators for November point to sustained momentum in economic activity, with demand conditions remaining robust. While headline CPI inflation edged up, it continued to stay below the lower tolerance level, providing comfort on the price front. Financial conditions remained benign, and the flow of financial resources to the commercial sector was described as strong and steady.
The central bank said global uncertainty has retreated further, although major equity markets witnessed volatility amid concerns over stretched valuations. It highlighted that 2025 has seen a major shift in global trade policies, with countries moving towards bilateral renegotiations on tariffs and trade terms, adding to uncertainty over global growth prospects. Portfolio flows to emerging markets have also slowed in recent months, reflecting a more cautious global risk appetite.
Despite external headwinds, the RBI said India has shown resilience, supported by coordinated fiscal, monetary and regulatory policies. The economy’s strong domestic demand has helped maintain robust growth, while a benign inflation outlook has given monetary policy adequate space to support expansion.
On the external front, India’s current account deficit moderated in Q2:2025-26 compared to a year earlier, aided by a lower merchandise trade deficit, robust services exports, and strong remittance inflows.
The RBI underlined that a continued focus on macroeconomic stability and structural reforms would be crucial to unlocking productivity gains and keeping India on a high-growth trajectory amid a rapidly changing global environment.
…..