‘Focus on fundamentals to keep India running’: RBI Bulletin

Mumbai: Focus on strong fundamentals and reforms would help India stay on the path of high growth despite global uncertainties, the Reserve Bank of India (RBI) said in its latest State of the Economy report released on Monday.“Continued focus on macroeconomic fundamentals and economic reforms should help realize efficiency and productivity gains to keep the economy firmly on a fast growth trajectory amid a rapidly changing global environment,” the December monthly bulletin said.

The central bank revised its GDP growth forecast for fiscal year 2025-26 to 7.3% from 6.8%, while lowering its inflation forecast to 2% from 2.6%, citing easing price pressures. India’s economy grew 8.2% in the second quarter of this year, the fastest pace in six quarters, thanks to private consumption and investment. Private consumption growth was supported by robust rural demand and easing inflationary pressures, the RBI said.

However, net exports continued to be a drag on growth, the central bank noted, due to the impact of punitive tariffs on Indian shipments to the US.

High-frequency indicators for November pointed to strong demand conditions, with urban spending picking up and rural demand helped by higher rabi sowings and record foodgrain stocks.

Headline CPI inflation rose to 0.7% in November from 0.3% in October, but remained below the lower tolerance band. Core inflation remained stable at 4.3%, but excluding gold and silver it fell to 2.4%.Policy action

In December, the RBI cut the policy repo rate by 25 basis points to 5.25% and maintained its neutral stance, citing room to support growth.

“Financial conditions remained favorable and the flow of financial resources into the commercial sector remained robust,” the report said. The current account deficit narrowed thanks to strong services exports and remittances, even as capital inflows declined.

The report, authored by RBI economists with inputs from Deputy Governor Poonam Gupta, highlighted resilience in the face of global headwinds, supported by robust domestic demand and favorable inflation prospects.

Global conditions remain challenging.

“The year 2025 brought about an unprecedented shift in trade policy, marked by tariff renegotiations and supply chain disruptions,” the RBI said. Stock markets were previously upbeat on Big Tech optimism but turned volatile on valuation concerns, while portfolio flows into emerging markets slowed after six months of inflows.

The rupee weakened in November on subdued foreign portfolio flows and uncertainty over the India-US trade deal, although volatility remained lower than most major currencies. Indian equities recovered in early November following policy rate cuts and strong corporate earnings, but later turned choppy as global risk sentiment deteriorated.