RBI Bulletin Cautions on Overheated Global Markets, Advocates Fiscal-Monetary Measures to Boost Investment in India
Fiscal, monetary, and regulatory measures are set to foster a “virtuous cycle” of growth driven by private investment, according to the Reserve Bank of India’s (RBI) November Bulletin. Despite ongoing global trade uncertainties, the RBI noted that the Indian economy is showing signs of resilience and momentum, bolstered by strong festive-season demand and the positive effects of Goods and Services Tax (GST) reforms. The Bulletin highlights improvements in inflation rates and financial conditions, suggesting a robust outlook for the economy.
Economic Momentum Amid Global Challenges
The RBI’s article on the State of the Economy indicates that the Indian economy is gaining momentum, particularly in October, thanks to increased consumer demand during the festive season. High-frequency indicators reveal significant growth in both manufacturing and services sectors. The report emphasizes that inflation has moderated to historic lows, remaining well below the target set by the RBI. Financial conditions are favorable, with a notable increase in the flow of financial resources to the commercial sector compared to the previous year.
Moreover, the RBI points out that India is becoming increasingly resilient to external shocks. This resilience is attributed to strong services exports, steady remittance flows, and a reduced negative impact of fluctuating oil prices on the current account. Key external vulnerability indicators have shown improvement, with the current account deficit remaining modest in the first quarter of FY26, suggesting a stable economic environment despite global uncertainties.
Foreign Direct Investment Trends
The Bulletin also highlights trends in Foreign Direct Investment (FDI) during the first half of the fiscal year 2025. FDI inflows from April to September 2025 surpassed those from the same period last year, both on a gross and net basis. In September alone, gross inward flows remained robust, with Singapore, Mauritius, the UAE, Luxembourg, and Qatar contributing to 78% of total inflows. Key sectors attracting FDI include manufacturing, retail and wholesale trade, communication services, financial services, and computer services.
However, the report notes a concerning trend: net FDI turned negative for the second consecutive month due to an increase in outward FDI and repatriation. This shift raises questions about the long-term sustainability of foreign investment in India, even as gross inflows remain strong.
Currency Movements and RBI Interventions
On the currency front, the RBI reported a slight depreciation of the Indian rupee against the US dollar in October, influenced by a stronger dollar following the Federal Reserve’s policy announcements. In mid-October, the rupee experienced a brief appreciation due to optimism surrounding India-US trade talks and renewed foreign portfolio investment inflows. Between November 1 and 21, the rupee appreciated by 0.1% compared to its level at the end of October.
To manage pressure on the rupee, the RBI intervened in the foreign exchange market, net selling USD 7.91 billion in September. In the onshore and offshore over-the-counter markets, the central bank sold USD 10.11 billion while purchasing USD 2.2 billion during the same month. The RBI clarified that the views expressed in the article are those of the authors and do not reflect the official position of the central bank.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
