India to remain fastest growing major economy despite geopolitical risks: RBI bulletin
Citing the first advance estimates of real GDP growth for 2025-26, Reserve Bank of India (RBI) bulletin has said that India will remain the fastest growing major economy even with heighten geopolitical risks and policy uncertainty ahead. It added that the current state of the economy provides ground for optimism going forward at a time when the year 2026 has begun with an escalation of geopolitical tensions, marked by developments such as the US intervention in Venezuela, the simmering conflict in the Middle East, ambiguity surrounding the Russia-Ukraine peace deal, and escalation of the row over Greenland. Besides, high-frequency indicators for December suggest continued buoyancy in growth impulses with demand conditions remaining upbeat. In December 2025, headline CPI inflation edged up but remained below the lower tolerance level.
The bulletin highlighted that over the past year the commercial sector has experienced surge in the flow of financial resources, with both non-bank and bank sources contributing to the credit pick-up. The total flow of financial resources to the commercial sector have rose to Rs 30.8 lakh crore in the 2025-26 so far (up to December 31) from Rs 21.3 lakh crore a year ago. Further in order to mitigate external sector risks, India has made significant efforts to diversify and strengthen its exports. The country has concluded trade negotiations with New Zealand and Oman in December 2025 and is currently engaged in trade negotiations with 14 countries or groups, representing nearly 50 nations, including the European Union, Gulf Cooperation Council countries, and the US.
Furthermore, the major economic reforms undertaken by the government are expected to strengthen the country’s growth prospects going forward. In 2025, the government has rationalized tax structures, implemented labour codes for labour market reforms and undertook financial sector deregulation. The bulletin noted that the policy focus on striking a balance between innovation and stability, consumer protection, and a prudent approach to regulation and supervision should help improve productivity and support long-term economic growth.
It noted that in real effective terms, the Indian rupee depreciated in December due to its depreciation in nominal effective terms and relatively lower inflation in India vis-a-vis its major trading partners. The Indian rupee depreciated against the US dollar in December, pressured by foreign portfolio outflows and uncertainty surrounding the India-US trade deal. However, it added that the volatility of the domestic currency, as measured by the coefficient of variation, remained relatively lower than that of most major currencies. Meanwhile, the views expressed in bulletin do not represent the views of the RBI.
