Indian Economy Shows Resilience Amid Global Challenges
Economic Growth Amid Global Uncertainty
New Delhi, Jan 1: Despite facing a challenging global economic environment, the Indian economy is demonstrating strong growth, driven by solid domestic demand, manageable inflation, and sound macroeconomic policies, according to the Reserve Bank of India (RBI).
The domestic financial landscape remains robust and resilient, supported by healthy balance sheets, favorable financial conditions, and minimal volatility in financial markets. However, the Central Bank has highlighted potential near-term risks stemming from external uncertainties, particularly geopolitical and trade-related factors, in its latest Financial Stability Report (FSR).
The report indicates that the global economy has shown resilience, bolstered by fiscal interventions, increased trade activity, and significant investments in artificial intelligence. Nevertheless, risks persist due to ongoing uncertainties, high public debt levels, and the potential for a chaotic market correction.
“While global financial markets appear stable at first glance, they are increasingly vulnerable. The rapid increase in equities and other risk assets, the growing influence of non-bank financial intermediaries, and the rise of stablecoins contribute to the fragility of the global financial system,” the report stated.
Furthermore, the RBI's findings reveal that the health of scheduled commercial banks (SCBs) remains strong, characterized by solid capital and liquidity reserves, enhanced asset quality, and robust profitability. Macro stress tests confirm that SCBs can endure losses in hypothetical adverse scenarios while maintaining capital buffers well above regulatory requirements. The resilience of mutual funds and clearing corporations has also been validated through these stress tests.
Non-banking financial companies (NBFCs) are also in a strong position, backed by substantial capital reserves, solid earnings, and improving asset quality. The insurance sector continues to show balance sheet strength, with the consolidated solvency ratio exceeding the minimum required threshold.
On the household front, debt has risen to 41.3 percent of gross domestic product (GDP) by the end of March 2025, reflecting a consistent increase from the five-year average of 38.3 percent, primarily driven by consumption-related loans. However, the Central Bank pointed out that India's household debt remains lower compared to many other emerging market economies.