Mumbai: India is expected to continue as the fastest-growing major economy globally in the fiscal year 2025-26, according to the Reserve Bank of India’s (RBI) latest annual report released on Thursday.
The RBI highlighted that the country’s strong macroeconomic fundamentals, a robust financial sector, and a commitment to sustainable growth will underpin this continued expansion. The central bank also noted that the current benign inflation outlook and a moderate GDP growth path justify a monetary policy that remains supportive of growth going forward.
While global uncertainties such as financial market volatility, geopolitical tensions, trade fragmentation, supply chain disruptions, and climate-related challenges pose downside risks to growth, they also present potential upward pressures on inflation.
On the positive side, easing supply chain bottlenecks, softening global commodity prices, and expectations of a good agricultural season supported by an above-normal southwest monsoon are favorable factors for controlling inflation.
The RBI pointed out that changes in tariff policies could trigger occasional volatility in financial markets. Additionally, exports may face challenges due to protectionist policies and tariff conflicts worldwide. However, India’s ongoing trade agreements are expected to mitigate some of these risks. Moreover, strong services exports and steady remittance inflows are likely to keep the current account deficit manageable in the coming fiscal year.
The central bank also reiterated its confidence in inflation aligning sustainably to the 4 percent target within the next 12 months. It recommended that banks stay vigilant about interest rate risks affecting both their trading and banking books, especially amid the observed moderation in net interest margins.
With these factors in place, the RBI’s outlook paints a positive picture of India’s economic trajectory, reinforcing its status as a leading growth engine on the global stage in FY26.
