The RBI’s monthly bulletin reveals that India’s GDP for 2025-26 demonstrates the country’s economic resilience despite global market volatility caused by conflicts in the Middle East and US trade investigations. High-frequency indicators suggest a growing economic momentum in India, with CPI inflation rising in February mainly due to food and beverages. The bulletin highlights that India’s foreign exchange reserves are sufficient to cushion against external shocks.
The ongoing conflicts in the Middle East and US trade probes have reintroduced uncertainties concerning global energy security and supply chains. The RBI bulletin warns that prolonged conflicts could negatively impact the global outlook. India’s dependence on crude oil necessitates close monitoring and proactive measures to mitigate adverse effects. However, the bulletin notes that India’s economy has strengthened its capacity to withstand external shocks over time.
India has diversified its crude oil sources and increased domestic refining capacity to enhance energy security. Policy measures have been implemented to counter disruptions in global fuel supply chains. The creation of an Economic Stabilisation Fund aims to provide fiscal flexibility in responding to global challenges. The second advance estimates of GDP for 2025-26, based on the new 2022-23 base year, indicate sustained resilience driven by strong domestic demand and robust private consumption and investment activities.
February saw a surge in economic activity in India, supported by both urban and rural markets benefiting from lower tax rates, cash flows from harvests, and the wedding season. Retail sales of vehicles and tractors hit record highs. Agriculture remained strong, with foodgrain production reaching unprecedented levels. Global uncertainties escalated in February due to geopolitical tensions and trade probes, leading to disruptions in oil infrastructure and financial markets.
The global commodity markets faced pressure from supply disruptions in oil, natural gas, and fertilizers, causing significant volatility. Brent crude oil prices fluctuated drastically, impacting markets for fuel products and industrial inputs like aluminium and urea. Financial markets reacted swiftly to the energy shock, with equity markets experiencing selling pressure, bond markets repricing, and emerging market currencies weakening. Major central banks maintained policy rates amidst heightened uncertainties.
