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New Delhi, May 22 (KNN) Reserve Bank of India officials have characterised the country’s economic outlook as one of ‘cautious optimism’ despite persistent global uncertainties, according to the May edition of the RBI Bulletin.
The assessment comes as policymakers worldwide grapple with shifting economic landscapes and ongoing vulnerabilities that continue to cloud the global economic outlook.
India is projected to maintain its position as the fastest-growing major economy in 2025, according to April projections from the International Monetary Fund.
The country is also expected to surpass Japan this year to become the world’s fourth-largest economy, RBI officials noted in their State of the Economy article published in the bulletin.
The central bank officials highlighted significant improvements in inflation dynamics, stating that price pressures have eased considerably and are positioned for sustained alignment with official targets during the 2025-26 period.
They cited prospects of a robust rabi harvest and forecasts of above-normal monsoon conditions as factors likely to strengthen rural consumption while keeping food inflation contained.
Consumer and business confidence levels remain supportive of strengthened economic activity, according to the assessment.
RBI officials emphasised that the Indian economy continues to benefit from comprehensive stability across multiple dimensions, including monetary, financial, and political frameworks.
They pointed to policy consistency, a conducive business environment, strong macroeconomic fundamentals, and a transparent, rule-based policy ecosystem as key protective factors for the domestic economy.
The central bank identified India’s emerging role as a ‘connector country’ amid ongoing global trade realignments and shifts in industrial policy.
Officials noted the country’s increasing positioning as a key intermediary in sectors including technology, digital services, and pharmaceuticals.
The recent completion of a free trade agreement with the United Kingdom was cited as evidence of strengthening bilateral trade relationships.
Currency markets showed relative stability during the reporting period, with the Indian rupee trading within a narrow range and demonstrating lower volatility compared to peer economies.
However, escalating tensions between India and Pakistan created market volatility, with the India VIX experiencing a substantial increase during the period of heightened geopolitical stress.
Financial market sentiment subsequently improved as India-Pakistan tensions eased, global trade conditions showed signs of improvement, and domestic inflation pressures continued to moderate.
Officials noted a significant structural shift in Indian equity markets, with domestic institutional investors surpassing foreign portfolio investors in ownership of Nifty-500 companies as of March 2025.
This development represents a notable change in market dynamics, as domestic institutional investors, including mutual funds and insurance companies, have increasingly offset volatility created by foreign portfolio investor activity.
Retail investor participation and systematic investment plan flows have provided a stable foundation for long-term investment, according to the RBI assessment.
The central bank highlighted that measures implemented since January 2025 have substantially improved liquidity conditions and contributed to calming financial markets.
Despite acknowledging significant challenges on the horizon, RBI officials expressed confidence in India’s ability to navigate current global headwinds while positioning the country to capitalise on emerging opportunities and maintain its role as a key contributor to global economic growth.
(KNN Bureau)
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