THEBUSINESSBYTES BUREAU

NEW DELHI, OCTOBER 23, 2026

The Indian economy has demonstrated resilience amid persistent global uncertainties, underpinned by robust macroeconomic fundamentals, sustained domestic demand and policy interventions to mitigate downside risks, the Reserve Bank of India (RBI) said in its October 2026 Bulletin on Friday.

The domestic economy continues to exhibit strength, as reflected in high-frequency indicators across industry and services, even as external headwinds and volatility in global markets pose challenges, the central bank said.

Despite India being a net importer of energy, economic growth has remained supported by resilient domestic demand and buoyant services activity, helping the country withstand external shocks, according to the monthly publication.

The RBI, however, flagged an uptick in headline retail inflation in September, driven by a broad-based increase in food, fuel and core components, indicating a wider spread of price pressures across commodities.

“Headline CPI inflation edged up over the months and showed signs of greater generalisation across commodities, calling for a commensurate change in the monetary policy stance,” the Bulletin said.

The central bank also highlighted a series of regulatory measures aimed at curbing speculative activity in the foreign exchange market to address external pressures and contain volatility.

The Indian rupee, which faced a depreciating bias until early October, gained subsequently following the RBI's measures to rein in speculative activity in the forex market, it added.

On the external front, India's merchandise exports registered double-digit growth during the first six months of the 2026-27 financial year, helping narrow the trade deficit in September.

Foreign direct investment (FDI), external commercial borrowings (ECB) and remittance flows strengthened in August, while robust inflows under the Foreign Currency Non-Resident (Bank) [FCNR(B)] swap window contributed to an accretion in foreign exchange reserves, the RBI said.

ECB activity also gained momentum during April-August 2026, with both registrations and net inflows improving over the corresponding period of the previous year. External sector vulnerability indicators remained contained, supported by adequate foreign exchange reserves, it added.

On the supply side, manufacturing activity expanded at a robust pace, while services continued to strengthen, supported by buoyant domestic and external demand.

Agricultural prospects presented a mixed picture, with kharif sowing concluding at an acreage above the normal level despite a deficient and uneven southwest monsoon, the Bulletin noted.

The assessment comes against the backdrop of an improved growth outlook for India. The International Monetary Fund (IMF) has raised its growth projection for the Indian economy in 2026-27 by 60 basis points to 7 per cent from its July estimate, citing stronger-than-expected economic momentum, resilient domestic demand and robust services activity.

The upward revision reinforces expectations that India will remain among the fastest-growing major economies, even as geopolitical uncertainties, global financial volatility and inflationary pressures continue to shape the economic outlook.

The RBI's assessment underscores the importance of sustaining domestic demand, maintaining macroeconomic stability and responding to emerging inflationary and external sector risks as the economy navigates an uncertain global environment.