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According to the June Monthly Bulletin of the Reserve Bank of India, global geopolitical tensions and trade disruptions continued despite the recent interim peace agreement between the US and Iran in West Asia. Amid this challenging global environment, India's economy grew by 7.8% in the fourth quarter of 2025-26, supported by strong private consumption and fixed investment. High-frequency indicators for the first two months of 2026-27 suggest that economic momentum has remained strong. Although consumer price inflation increased in May, it remained broadly under control. The RBI noted that India's external sector continues to be resilient, supported by steady foreign direct investment (FDI) inflows and comfortable foreign exchange reserves. The bulletin cautioned that the global economic outlook remains fragile. Any breakdown of the interim US-Iran peace agreement could increase risks related to inflation expectations, disruptions to critical energy infrastructure, delayed investment decisions, food security concerns, financial market stability and slower global growth. According to the RBI, these uncertainties could affect India through channels such as international trade, higher cost pressures, capital flows and commodity price movements. However, India is better positioned than many countries to withstand external shocks due to its strong economic fundamentals. The central bank highlighted the country's sustained high growth, well-anchored inflation expectations, continued fiscal consolidation, manageable current account balance and adequate foreign exchange reserves as key strengths. The RBI also noted that an adverse south-west monsoon, if it materialises, could pose risks to both growth and inflation in the domestic economy. Powered by Capital Market - Live News
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