Mumbai: The current state of the economy provides ground for optimism going forward and India will remain the fastest growing major economy, notwithstanding elevated geopolitical risks and policy uncertainty ahead, a Reserve Bank bulletin said on Wednesday.
The year 2026 began with an escalation of geopolitical tensions, marked by developments such as the US intervention in Venezuela, the simmering conflict in the Middle East, ambiguity surrounding the Russia–Ukraine peace deal, and escalation of the row over Greenland, all of which point to still-elevated geo-economic risks and policy uncertainty ahead, it said.
“Even amidst these global uncertainties, the current state of the economy provides ground for optimism going forward. The GDP growth estimates for 2025-26 indicate that India will remain the fastest growing major economy in the world,” said an article published in the January bulletin.
Global growth remained resilient in 2025 despite heightened uncertainties. Though elevated, global uncertainty witnessed further moderation in December.
The first advance estimates of real GDP growth for 2025-26 reflected the resilience of the Indian economy, driven by domestic factors amidst a challenging external environment.
The article further said high-frequency indicators for December suggest continued buoyancy in growth impulses with demand conditions remaining upbeat.
Headline CPI inflation edged up in December but remained below the lower tolerance level.
“The flow of financial resources to the commercial sector has increased over the past year, with both non-bank and bank sources contributing to the credit pick-up,” it added.
During 2025-26 so far (up to December 31), total flow of financial resources to the commercial sector increased to Rs 30.8 lakh crore from Rs 21.3 lakh crore a year ago.
Non-bank sources-corporate bond issuances, and foreign direct investment to India showed a marked increase during the year so far. As on December 31, 2025, the total outstanding credit to the commercial sector rose by 15 per cent, with non-bank sources registering a growth of 16.4 per cent.
The article also noted that India has made significant efforts to diversify and strengthen its exports, aiming to mitigate external sector risks.
The country is currently engaged in trade negotiations with 14 countries or groups, representing nearly 50 nations, including the European Union, Gulf Cooperation Council countries, and the US.
In December 2025, India concluded trade negotiations with New Zealand and Oman.
The year 2025 also witnessed major economic reforms, including the rationalisation of tax structures, implementation of labour codes for labour market reforms, and financial sector deregulation, all of which are expected to strengthen the growth prospects, the article said.
Going forward, the article said that the policy focus on striking a balance between innovation and stability, consumer protection, and a prudent approach to regulation and supervision should help improve productivity and support long-term economic growth.
It further said that in real effective terms, the Indian rupee depreciated in December due to its depreciation in nominal effective terms and relatively lower inflation in India vis-à-vis its major trading partners.
The Indian rupee depreciated against the US dollar in December, pressured by foreign portfolio outflows and uncertainty surrounding the India-US trade deal.
The volatility of the domestic currency, as measured by the coefficient of variation, remained relatively lower than that of most major currencies.
Till January 19, the rupee depreciated by 1.2 per cent over its end-December level.
The article said that during April-November 2025, foreign direct investment (FDI) remained higher than in the same period last year, both in gross and net terms.
Gross inward FDI remained steady in November with Japan, Singapore, and the US accounting for more than 75 per cent of total FDI inflows.
However, net FDI remained negative in November for the third consecutive month, mainly due to high repatriation.
