Indian Economy Less Vulnerable to Global Headwinds: RBI Bulletin

Mumbai: India's economy is relatively less vulnerable to global headwinds and calibrated policy support can help the country turn global volatility into an opportunity and strengthen its position in the emerging world economic landscape, said the Reserve Bank of India’s (RBI) April Bulletin released on Tuesday.

The central bank said that India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages. Moreover, India's consistent strength in services exports and remittance inflows continues to provide a vital buffer for the current account, said the central bank in an article on 'State of the Economy' in the bulletin.

"Although the dampening global economic outlook could impact India's economic growth through weaker external demand, the domestic growth engines ... consumption and investment, are relatively less susceptible to external headwinds," the RBI said.

Strong domestic growth impulses and sound macro-fundamentals have helped the economy stay resilient despite global trade tensions, it

said, adding that prospects for the farm sector have been boosted by above-normal monsoon forecast.

India's retail inflation slipped to a more-than-five-year low of 3.34 per cent in March as food prices continued to moderate, creating room for deeper central bank rate cuts amid fears the U.S.-China trade war may hit global growth.

The article also noted that a decline in global commodity prices, however, could ease pressure on inflation in commodity-importing countries, although currency pressures could partly offset such benefits.

In another article, the RBI’s survey on “Rural Consumer Confidence in India: Bridging the Gap” showed that the rural households’ sentiments on the overall economy and employment have significantly improved since 2022, with sustained optimism about the year-ahead outlook.

Although inflation concerns persist, perceptions of current and expectations of future inflation have shown a gradual easing, said the Survey

Meanwhile, the real effective exchange rate (REER) of the Indian rupee continues to moderate, falling to 101.49 in March, against 102.37 in February. The REER had increased from 103.66 in January 2024 to 108.14 in November 2024, before moderating to 107.20 in December 2024.