The Reserve Bank of India (RBI) stated in its Annual Report 2025 that India's economy is projected to grow at a rate of 6.5% in the fiscal year 2025-26. Inflation is expected to remain close to the target of approximately 4%. The report expresses b optimism regarding economic growth while acknowledging global economic uncertainties and challenges.
India's Economy to Remain Fastest Growing
The RBI clarified that India will continue to be the world's fastest-growing major economy in the next fiscal year. The country's robust economic infrastructure, b financial system, and commitment to sustainable development are cited as key drivers of this success.
The report also highlighted challenges to growth, including volatility in global financial markets, geopolitical tensions, supply chain disruptions, and climate change. However, despite these challenges, India's growth rate is expected to remain robust.
RBI Confident in Inflation Control
The RBI projected inflation to remain near 4%, aligning with the central bank's target. This suggests that necessary measures will be taken to keep inflation under control. The report also cautioned banks about risks stemming from interest rate changes, particularly regarding potential reductions in net interest margins (NIMs).
Significant Increase in RBI's Balance Sheet
The Reserve Bank of India's financial position has also strengthened. As of March 31, 2025, the size of the RBI's balance sheet increased by 8.20% to ₹76.25 lakh crore. This increase was primarily driven by growth in gold reserves, domestic investments, and foreign investments.
Consequently, the RBI paid a dividend of ₹2.69 lakh crore to the central government. The report indicated a 22.77% increase in the bank's income, while expenditure rose by only 7.76%. Overall, the RBI's surplus at the end of the year was ₹2,68,590 crore, approximately 27% higher than the previous year.
Financial Market Volatility and Impact on Exports
The report also cautioned about potential volatility in financial markets due to changes in tariff policies. Furthermore, India's exports may face some difficulties due to "inward-looking policies" and tariff wars.
The RBI stated that signing and continuing negotiations on trade agreements will help mitigate these issues. Service sector exports and remittances from abroad will also help in keeping the current account deficit under control.
RBI Policy and Direction of Economic Growth
The RBI has implemented two consecutive cuts in policy interest rates to stimulate economic growth. Monetary policy will continue to support growth in the future, accelerating investment and production.
