FILE PHOTO: man stands in front of the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India, February 6, 2026. REUTERS/Francis Mascarenhas//File Photo
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The Indian economy continues to display strength, characterised by buoyant domestic demand, and rising manufacturing and services activity, notwithstanding headwinds arising from fragile geopolitical environment and continuing trade-related uncertainties, according to RBI’s latest monthly bulletin.“The global economic outlook continues to be shaped by geopolitical frictions in West Asia and fresh tariffs by the US. Despite these risks to global trade and the growth-inflation matrix, India’s robust macroeconomic fundamentals continue to provide cushion to the domestic economy,” said RBI officials in the “State of the Economy”report published in the central bank’s latest monthly bulletin. TThey said the momentum of Q1 (April-June):2026-27 continued in July with most of the high-frequency indicators reflecting sustained manufacturing and services activity, and double-digit expansion in merchandise exports and imports.“Domestic demand remained buoyant, as reflected by several indicators, including vehicle and tractor sales. Petroleum product consumption growth returned to positive territory, after three straight months of contraction.“Industrial production strengthened sharply in June, recording its strongest growth in nearly two years, supported by a broad-based acceleration in manufacturing. The services sector also exhibited resilience,” the officials said.Further, both merchandise exports and imports grew strongly (at 19.6 per cent and 17.5 per cent year-on-year/ y-o-y, respectively) in July 2026 with exports growing at a four month high (in 2026-27 so far). Merchandise trade deficit widened in July, both sequentially and on a y-o-y basis, reflecting a widening of deficit in electronic goods.The officials said the recovery in southwest monsoon in July helped in kharif sowing reaching closer to normal acreage, partly mitigating some of the risks to the agriculture sector.Inflation edges upWhile headline CPI inflation edged up above the target (to 4.4 per cent in June 2026 after remaining below the target for 16 consecutive months), the officials observed that it was primarily on account of supply side pressures. Stable core inflation reaffirmed the lower pass-through of cost pressures.The officials said financial conditions are characterised by high credit growth (19.3 per cent y-o-y as on July 31, 2026), comfortable liquidity, and softening G-Sec yields supported by rebound in capital inflows.Published on August 25, 2026
