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A sustained focus on macroeconomic fundamentals and economic reforms is expected to keep the Indian economy on a high-growth trajectory despite rising global uncertainties, highlighted a report by the Reserve Bank of India.
According to the report, the year 2025 witnessed an unprecedented shift in global trade policies, with several countries moving towards bilateral renegotiations on tariffs and terms of trade. The ripple effects of these changes on global trade flows and supply chains are still unfolding, leading to heightened uncertainty and concerns over global growth prospects. It stated "The year 2025 brought about an unprecedented shift in global trade policies....... The Indian economy was not fully immune to the external sector headwinds... Continued focus on macroeconomic fundamentals and economic reforms should help unlock efficiencies and productivity gains to firmly keep the economy on the high-growth trajectory amidst a fast-changing global environment". The report highlighted that a benign inflation outlook provided adequate space for monetary policy to support growth. Continued emphasis on strengthening macroeconomic fundamentals and pursuing economic reforms is expected to unlock efficiencies and productivity gains, reinforcing India's growth momentum. On the financial markets front, the RBI said equity markets remained buoyant during much of the year, driven largely by optimism around Big Tech companies. However, concerns over elevated valuations have recently led to some risk-off sentiment in equity markets. Portfolio flows to emerging markets have also slowed in recent months, reflecting growing global caution. The report referred to the Monetary Policy Committee (MPC) resolution of December 5, which revised India's growth projection for 2025-26 upward by 50 basis points to 7.3 per cent, from 6.8 per cent projected during the October bi-monthly review. At the same time, the CPI inflation projection for 2025-26 was revised downward by 60 basis points to 2.0 per cent from the earlier estimate of 2.6 per cent. High-frequency indicators for November for the domestic economy suggested that overall economic activity remained resilient, with demand conditions staying robust. Although headline CPI inflation edged up, it continued to remain below the lower tolerance level. Financial conditions remained benign, and the flow of financial resources to the commercial sector was steady. The RBI further noted that India's current account deficit moderated in the second quarter of 2025-26 compared to the same period last year, supported by a lower merchandise trade deficit, strong services exports and robust remittance inflows. Overall, the report highlighted that India remains well-positioned to navigate global challenges while sustaining strong economic growth. (ANI)
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