Reserve Bank of India. (File Photo)
The evolving situation due to the ongoing conflict in West Asia and fresh trade investigations by the US needs close monitoring, with prudent steps to contain any spillovers, the Reserve Bank of India (RBI) said in an article on Monday.
The article, however, highlighted that the country’s foreign exchange reserves remain adequate to provide cushion against external shocks. As of March 13, the country’s forex reserves stood at $709.75 billion.
“For the domestic economy, given India’s external dependence on crude oil, the evolving situation requires close monitoring and proactive measures to limit adverse spillovers even though it is mention worthy that the capacity and resilience of the Indian economy to absorb external shocks have strengthened over time, buttressed by its strong growth, sound macroeconomic fundamentals and robust external sector buffers,” the RBI said in the State of the Economy article published in its monthly bulletin for March.
The RBI said that the views published in the article are of the authors and not of the institution.
The renewed conflict in West Asia and the US investigations into trade practices of key trading partners have brought uncertainties regarding global energy security. Prolonged periods of war and high uncertainty would be detrimental to the broader global outlook, which was already in a state of flux prior to the recent events, it said.
In terms of energy security, India has progressively diversified its crude oil import sources and augmented its domestic refining capacity. Since the start of the conflict, several policy measures have been implemented to blunt the immediate impact of the disruptions in global fuel supply chains and to achieve more effective use of domestic capacity to meet shortfalls, it said.
The creation of an Economic Stabilisation Fund would further provide fiscal headroom and buffer to proactively respond to global headwinds.
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The article added that the second advance estimates of GDP for 2025-26, with the new base year 2022-23, indicate sustained resilience in the Indian economy. According to the new series, the Indian economy remained robust, with real GDP growth accelerating to 7.6% in 2025-26 from 7.1% a year ago amidst heightened global uncertainty.
“The growth was driven by strong domestic demand, with private final consumption expenditure maintaining momentum and investment activity remaining robust,” it said.
The growth in Q3 FY26 remained high at 7.8%, despite moderation in net exports due to dampening of merchandise exports following weak global trading environment including the higher US tariffs.
The article said the economic activity picked up pace in February, as evidenced by high-frequency indicators of fuel consumption, trade and logistics. E-way bills continued to exhibit double-digit growth supported by GST rate rationalisation.
