RBI Reports Resilience of Indian Economy Despite Global Challenges
NEW DELHI: The Reserve Bank of India (RBI) reported on Friday that the Indian economy has shown resilience despite global challenges. The recent escalation of conflict in West Asia has led to a significant rise in oil prices, raising concerns about inflation and potential disruptions in supply chains. The RBI’s latest bulletin highlighted that strong Foreign Currency Non-Resident (FCNR(B)) deposits initially supported the Indian rupee, but gains were reversed later in September due to higher crude prices.
The RBI noted that the high level of surplus liquidity, driven by $133 billion in FCNR(B) flows, can sustain ongoing credit growth, particularly in the industrial sector. In August, bank deposits grew at their fastest rate in 15 years, which contributed to a moderation in the incremental credit deposit ratio. Despite the challenging global environment, the Indian economy recorded strong GDP growth in the first quarter of 2026-27. High-frequency indicators through August indicated sustained demand, with resilience observed in various segments of industry and services.
Gross, Net FDI Rise
Recent data from the RBI revealed a 64% increase in net Foreign Direct Investment (FDI), reaching $7.3 billion in July, supported by robust gross inflows of $14.6 billion, a rise of over 31% compared to the previous year. The communication, financial, and computer services sectors accounted for more than 80% of the equity inflows. Major source countries for these investments included Mauritius, the UAE, and the US, which collectively represented about 70% of the equity inflows.
During the period from April to July, net FDI inflows were 38% higher at $13.4 billion, while gross FDI rose by 12.6% to $43.9 billion. Additionally, after two months of decline, overseas investments increased by 26% in July to $3.4 billion. The RBI noted that over two-thirds of outward FDI flows were directed towards Singapore, the UK, and the UAE, with financial, insurance, business services, and manufacturing sectors comprising about two-thirds of these outward flows.
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