Mumbai: Indian economy has navigated the external uncertainties well and the recovery of foreign investments in recent months shows a revival of confidence, the Reserve Bank Bulletin said on Wednesday.
The global economy is continuing with the heightened uncertainties emanating from fragile geopolitics and supply chain pressures, said an article published in the July Bulletin of the central bank.
“Amidst these uncertainties, India remains among the fastest growing major economies across the globe and has been able to sustain the momentum in economic activities through June. Both industrial and services sector indicators remained firm,” it said.
The article on the ‘State of the Economy’ also noted that the farm sector is witnessing uneven southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks.
It further said the momentum of external trade sustained as reflected in high growth in exports and imports in Q1 of 2026-27.
This is likely to be strengthened by the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement (CETA) and progress in other bilateral trade agreements, it added.
“External vulnerability indicators also remained sound. Recovery of foreign investments in recent months shows a revival of confidence in the economy,” the article said.
Foreign portfolio investments saw net inflows in June 2026, driven by policy support for the debt segment and easing of geopolitical tensions, it said.
In July (up to July 20), FPIs infused USD 3.1 billion into the equity and debt segments.
During April-May 2026, FDI remained higher in both gross and net terms, supported by lower repatriation, it said.
Japan, Singapore and Mauritius accounted for around 74 per cent of the total equity inflows. Financial services received the highest share of equity inflows, followed by manufacturing, retail and wholesale trade, and computer services.
These sectors together accounted for around 80 per cent of total inflows.
Of the outward FDI, the article said around 74 per cent of the flows were directed towards the US, Cayman Islands, and the Netherlands. The major sectors included financial, insurance & business services and manufacturing, accounting for more than 85 per cent of the outward flows during April-May 2026.
On the price situation, the article said the headline Consumer Price Index (CPI) inflation crossed the target for the first time since January 2025, increasing to an 18-month high of 4.4 per cent in June 2026 from 3.9 per cent in May.
The pick-up in inflation was driven by ‘food and beverages’ and ‘fuel’ components while core inflation stood unchanged.
It further said the sequential increases in key food items appeared to be broad-based in July so far (up to July 20).
Within foodgrains, prices of key staples (rice and wheat) recorded an uptick, while the pace of increase in pulses prices moderated sequentially, with moong dal recording a marginal decline month-on-month.
Edible oil prices continued to show a broad-based increase amidst use of edible oils for biofuel production.
Indonesia, the world’s largest producer of palm oil, has recently raised its palm oil blending targets in diesel from 40 per cent to 50 per cent.
Within perishables, prices of major vegetables – potato, onion and tomato – increased further in July, with the largest spike recorded in onion, it said.
The central bank, however, said the views expressed in the Bulletin article are those of the authors and do not represent the views of the Reserve Bank of India.
