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India's financial, external sectors continue to draw strength from resilient domestic economy: RBI Bulletin
Sep-28-2026

Reserve Bank of India (RBI) in its article on 'State of the Economy' published in the latest Bulletin has said that India's financial and external sectors continue to draw strength from a resilient domestic economy. However, it flagged the escalating geopolitical tensions and weather-related uncertainties as the key risks. It noted that the renewed conflict between US and Iran in September has pushed up crude oil prices sharply, raising the prospect of fresh supply-chain disruptions and renewed inflationary pressures. Alongside, the rise in sovereign yields in some of the major advanced economies has put pressure on government finances.

Notwithstanding the ongoing global turbulence, the article said the Indian economy recorded robust growth of 7.8 per cent in Q1:2026-27, driven by domestic consumption and investment. It further said system liquidity remained in surplus in August and surged further in the first half of September as banks tapped the Reserve Bank's Foreign currency non-resident (Bank) [FCNR(B)] swap facility, before moderating later in the month due to tax-related outflows. It said money supply growth accelerated in August on account of a rapid increase in aggregate deposits. Credit growth maintained its momentum while deposit growth picked up.

According to the article, Indian equity markets remained subdued in August and September as geopolitical tensions and elevated bond yields weighed on investor sentiment. The current account deficit remained moderate in Q1:2026-27, supported by robust services exports and remittance flows. It said foreign direct investment (FDI) flows strengthened in July with net FDI reaching its highest monthly level in five years, and added that net inflows under non-resident deposits rose sharply. Various capital flow measures announced in June supported the accumulation of foreign exchange reserves, which rose to $765.9 billion as of September 18, 2026. On the other hand, the article said, foreign portfolio investment (FPI) registered net outflows in September after witnessing inflows in August, on re-escalation of the West Asia crisis and rising global bond yields. 


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