MUMBAI: Amid growing global uncertainties and persistent financial market volatility, the Reserve Bank of India (RBI) has underlined the Indian economy’s continued role as a key engine of global growth.
The central bank’s latest Financial Stability Report (FSR), released on Monday, points to the country’s strong macroeconomic fundamentals and policy prudence as the foundation for its resilience.
Despite headwinds from elevated economic and trade policy uncertainties, which are testing the stability of the global economy and financial systems, India has managed to hold its ground.
According to the report, financial markets around the world remain volatile – particularly core government bond markets – due to shifting policy dynamics and ongoing geopolitical tensions.
Public debt
The RBI warned that pre-existing vulnerabilities such as high public debt and elevated asset prices could intensify the impact of any new shocks.
In this context, the RBI said India stands out for its stability. The domestic financial system remains robust, supported by healthier balance sheets in both banking and non-banking sectors.
Eased financial conditions and relatively low market volatility have helped reinforce macroeconomic stability. The strength of corporate balance sheets has also contributed to the overall resilience of the economy.
Scheduled commercial banks (SCBs), in particular, have shown marked improvement. The RBI noted that their financial soundness is underpinned by strong capital buffers, historically low levels of non-performing assets, and improved profitability.
Stress testing results suggest that most banks are well-capitalised, even under adverse economic conditions.
The report also pointed to the resilience of mutual funds and clearing corporations, based on system-wide stress test outcomes.
Together, these indicators present a picture of a financial sector that is capable of withstanding external shocks, while continuing to support economic growth.
As advanced economies grapple with fragility in their banking systems and volatile fiscal environments, India’s relatively stable and steadily growing economy offers a counterpoint – both as a driver of regional development and as a contributor to global economic momentum.
