New Delhi: Weak monsoons coupled with strong El Nino, protracted geopolitical tensions, rising international commodity prices, additional frictions in global trade, and tightening of global financial conditions could adversely impact the growth outlook, the Reserve Bank of India (RBI) said on Friday.
The outlook remains vulnerable to geopolitical developments, volatility in global energy markets and weather-related uncertainties, the central bank said in the October 2026 issue of its monthly Bulletin.
Persistent supply-side pressures in food and volatile global energy prices pose risks to the domestic inflation outlook, particularly through second-round effects amid strong growth impulses, it noted.
“The interplay of these factors will shape the evolving growth–inflation dynamics, with the balance of risks depending on developments in global growth, crude oil prices, exchange-rate movements, and domestic food supplies,” the RBI cautioned.
Globally, renewed energy-price pressures stoked inflation pressures and prompted a more hawkish stance from the central bank. Fiscal sustainability concerns, persistent inflation, and geopolitical uncertainty raised bond yields, while equity markets remained volatile amid lingering concerns about valuations of technology stocks.
“Amidst global uncertainty, domestic financial markets underwent intermittent volatility during H1:2026-27. System liquidity surplus surged in September 2026, mainly on account of the Reserve Bank’s swap facilities. Overnight rates in the money market evolved in sync with prevailing liquidity conditions,” said the RBI.
Transmission to lending and deposit rates plateaued with the status quo in the policy rate during H1:2026-27. Bank credit growth became broad-based and strengthened further.
The domestic economy showed resilience in H1 2026-27, despite continued global uncertainty amidst the conflict. The supply-side pressures were alleviated by proactive policy measures by the government that ensured adequate supply of key inputs.
Real GDP recorded a growth of 7.8 per cent in Q1 2026-27, reflecting strong momentum in underlying economic activity. Aggregate demand remained strong on the back of both private consumption and investment. Net external demand was also robust and contributed significantly to growth, the central bank highlighted.
“Stable employment conditions, congenial financial conditions, revival in corporate investment, and a pickup in goods exports – nurtured by bilateral FTAs and diversification – are expected to support economic activity going forward. Sustenance of private consumption growth will be essential for broad-based recovery in private capex,” said the RBI.
–IANS–
