New Delhi, March 23: The Reserve Bank of India’s (RBI) monthly bulletin highlights that despite ongoing conflicts in the Middle East and rising global market instability, India’s economy remains robust. The second advance estimates for GDP for 2025-26 reflect this strength.
According to the RBI bulletin, economic activities in the country accelerated in February. Inflation, measured by the Consumer Price Index (CPI), rose primarily due to food and beverages. Liquidity in the system remained adequate, and financial support to the business sector increased. Additionally, India’s foreign exchange reserves are strong enough to withstand external shocks.
The report noted that the war in the Middle East and the initiation of trade checks by the United States have heightened uncertainty regarding global energy security, import duties, and supply chains. If this situation persists, it could impact the global economy significantly.
Domestically, given India’s reliance on crude oil, it is crucial to monitor the situation closely. However, the RBI stated that over time, India’s economy has become more resilient to external shocks, thanks to strong growth, a solid economic foundation, and a robust foreign sector.
In terms of energy security, India has diversified its sources of oil imports and increased its refining capacity. Since the onset of the conflict, the government has taken several steps to mitigate the impact of global supply disruptions and to optimize the use of domestic resources.
The RBI also suggested that establishing an ‘Economic Stabilization Fund’ could provide the government with additional financial support to tackle such global crises.
GDP figures indicate that economic growth remains strong in the fiscal year 2025-26, driven significantly by domestic demand. Both private consumption and investment have remained robust, with the economy growing at a rate of 7.8 percent in the third quarter.
In February, demand in both urban and rural markets was strong. Lower taxes, income from the Kharif crop, and the wedding season contributed to this trend. During this period, sales of two-wheelers, passenger vehicles, and tractors reached record levels. The agricultural sector also remained strong, with food grain production expected to hit record levels in the fiscal year 2026.
Globally, tensions in the Middle East have disrupted oil and gas supplies, leading to increased volatility in commodity and financial markets. The International Energy Agency (IEA) has described this as the largest supply disruption in the history of the global oil market.
Brent crude prices have seen significant fluctuations, rising from $78 per barrel to $112.2. Additionally, industrial products like aluminum and urea have also been affected.
The RBI bulletin noted that the energy crisis has impacted financial markets as well. In March, stock markets experienced declines, particularly in countries reliant on energy imports. Changes were also observed in the bond market, with the US dollar strengthening. In this environment, major central banks around the world opted not to change interest rates during February-March and adopted a cautious stance.
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