While the economy is susceptible to external sector headwinds, RBI Bulletin has pointed out that coordinated fiscal, monetary and regulatory policies have helped build resilience in the economy. Further, on the backdrop of dynamic global environment, continued focus on macroeconomic fundamentals and economic reforms are expected to boost efficiencies and productivity gains to firmly keep the economy on the high-growth trajectory. The bulletin pointed that an unprecedented shift in global trade policies has taken place in 2025, with countries moving towards bilateral renegotiations on tariffs and terms of trade, and its ripple effects on global trade flows and supply chains are still unfolding, leading to high global uncertainties and concerns about the prospects for global growth.

The Bulletin highlighted that the Indian economy grew at its fastest pace in the last six quarters, aided by resilient domestic demand in Q2:2025-26. It added that high-frequency indicators for the month of November indicated that overall economic activity has sustained supported by robust demand. Besides, headline CPI inflation edged up but continued to remain below the lower tolerance level. It noted that financial conditions remained benign, and the flow of financial resources to the commercial sector remained robust.

Moreover, lower merchandise trade deficit, robust services exports, and strong remittance receipts have helped country to moderated its current account deficit in Q2:2025-26 against same period last year. It noted that the foreign direct investment remained higher during April-October 2025 as compared to same period last year. On the softening rupee, it pointed that the strengthening of the US dollar, muted foreign portfolio flows, and uncertainty surrounding the India-US trade deal have weighed on Indian rupee.