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New Delhi, Oct 21 (KNN) The Reserve Bank of India (RBI), in its latest State of the Economy report released on Monday, said that while the Indian economy remains resilient, it is not entirely insulated from global headwinds. The report highlighted that net foreign direct investment (FDI) turned negative in August due to moderating inflows and increased repatriation of funds. “While the Indian economy is not immune to global headwinds, it has so far exhibited resilience, driven by a focus on strong and durable macroeconomic fundamentals,” the report stated. It attributed this strength to low inflation, healthy balance sheets of banks and corporates, adequate foreign exchange reserves, and a credible monetary and fiscal policy framework. Authored by RBI staff under the guidance of Deputy Governor Poonam Gupta, the report clarified that the views expressed were those of the authors and not the central bank itself. It cited the International Monetary Fund’s October World Economic Outlook, which described the emergence of ‘a new global economic landscape’ amid rising protectionism in the United States and growing fiscal vulnerabilities in advanced economies. “The state of flux of the global economy and policies presents considerable uncertainties to the macroeconomic outlook,” the report cautioned. Domestically, high-frequency indicators pointed to continued momentum, with signs of recovery in urban demand and robust rural consumption. The agriculture sector maintained steady growth, supported by above-normal rainfall and higher kharif sowing. While manufacturing activity moderated slightly, business confidence in both manufacturing and services reached a six-month high, reflecting improved optimism. The report noted that headline retail inflation in September fell to its lowest level since June 2017, remaining below the target for the eighth consecutive month. The decline was driven by deflation in food prices, even as core inflation (which excludes food and fuel) edged up due to higher gold and housing prices. Citing the Monetary Policy Committee (MPC) resolution of October, the report said the growth outlook remains resilient, buoyed by domestic demand and structural reforms, despite external challenges. “The current macroeconomic conditions and outlook, as noted by the MPC, have opened up policy space for further supporting growth,” it added. The RBI report also observed a decline in outward FDI during August, primarily directed toward financial services, insurance, business services, and manufacturing. The major destinations for these investments were Singapore, the United Arab Emirates, and the United States. Overall, the central bank’s analysis underscored a cautiously optimistic view — recognising the strength of India’s macroeconomic fundamentals while acknowledging that global uncertainty continues to pose risks to the country’s growth trajectory. (KNN Bureau)
