MUMBAI: Liquidity conditions have improved further, supporting robust credit growth even as Indiaâs external sector remains steady with an improving outlook aided by foreign investment inflows, RBI said in its latest State of the Economy report, noting that the domestic economy has navigated a âtumultuous phaseâ in global markets marked by fragile geopolitics and supply chain pressures.
The central bank said that the global economy is continuing with the heightened uncertainties, but added that on the domestic front India has ânavigated the external uncertainties well, underpinned by healthy demand conditions and resilient performance of the industrial and services sectorâ.
On the agriculture front, RBI flagged that there has been delayed kharif sowing due to the uneven progress in southwest monsoon amid prevailing El Niño conditions, while noting that high public foodgrain stocks should provide some cushion against price pressures.
The report added that âIndiaâs key external sector vulnerability indicators remained well-anchored as at end-March 2026â with comfortable forex reserves, and the outlook is expected to be strengthened by the operationalisation of the India-UK Comprehensive Economic and Trade Agreement and progress in other bilateral trade agreements.
RBI said demand conditions remained healthy, supported by a pickup in rural demand and firm urban demand.
Rural recovery was reflected in tractor sales accelerating with the commencement of kharif sowing, while two-wheeler sales recorded robust growth. Urban demand was sustained by passenger vehicle sales. High-frequency indicators such as GST e-way bills and digital payments, which recorded value growth of more than 20% for the first time in the last 19 months, pointed to strong economic activity, RBI said.
The central bank said âthe domestic economy continued to remain buoyantâ and that âIndia remains among the fastest growing major economies across the globeâ, with high-frequency indicators up to June pointing to robust industrial performance and a resilient services sector. However, retail inflation edged up, with âheadline consumer price index (CPI) inflation edged up in June driven by food and fuel componentsâ to an 18-month high of 4.4%.