RBI officials stated that the near-term economic outlook remains favorable and well-positioned to sustain high growth momentum, driven by consumption, investment, and productivity-enhancing reforms. Inflation is expected to remain benign and near the target. However, global conditions introduce some volatility.
In the State of the Economy chapter of the February 2026 RBI Bulletin, released on February 20, 2026, officials noted that the economy is well-positioned to sustain its high growth momentum. They emphasized that inflation is expected to remain benign and near the target, providing a positive growth-inflation balance in the near term.
However, the global economic outlook and financial market conditions are in flux, influenced by diverse signals that impart volatility to market movements. Officials stated, “While the simmering geopolitical tensions, public debt sustainability concerns in Advanced Economies (AEs), stretched valuation of AI firms and disruptions of AI on software services industry, are posing negative risk to outlook, robust macro-economic data releases including corporate earnings, on the other hand, have added to the positive sentiments.”
The completion of India-EU free trade negotiations in late January and the interim trade agreement between India and the U.S. are expected to improve market access, enhance export competitiveness, and integrate Indian firms more deeply into global value chains. This has led to a shift in investor sentiments in the immediate term. Foreign portfolio investment into equity and debt segments made a comeback in February.
On the fiscal front, the continued commitment to fiscal consolidation and debt sustainability signals prudent macroeconomic management. The gradual reduction in the fiscal deficit, combined with a sustained emphasis on capital expenditure, would crowd in private investment and improve productive capacity. Support to states for capital investment is also likely to reinforce sub-national growth and infrastructure development.
