Summary of this article
India has remained resilient to external shocks, states RBI
Macroeconomic stability and banking strength have improved shock absorption
RBI stresses need to build stabilisation buffers for risks
India's economy has been able to maintain its resilience and withstand the external shocks as a result of stronger macroeconomic fundamentals and the health of the financial sector and more stable policy frameworks, the Reserve Bank of India (RBI) has said in its March 2026 Bulletin. The central bank has also emphasised the importance of developing and sustaining adequate buffers to deal with global uncertainties like volatility in capital flows, commodity prices and policy disruptions.
Resilient Economy, Stronger Fundamentals
RBI has stated that the combination of steady growth, improved macro-economic stability, and stronger financial sector health has strengthened the economy's resilience to external shocks.
The RBI Bulletin has stated that the Indian economy has shown steady growth, with average GDP growth rising to 7.7 per cent in recent years from 5.7 per cent in the 1980s. At the same time, stability in key macro-economic variables has also increased, with inflation falling to below 5 per cent in recent years from nearly 10 per cent in the 1990s, and inflation volatility also declining.
The current account deficit (CAD) has also shown stability and has fallen to 0.75 per cent of GDP in the last six years, remaining at manageable levels. The CAD is the gap between the country's current receipts and payments, and it is seen as a key macroeconomic parameter.
All these trends have pointed to a larger process of macroeconomic stabilisation, which has made the economy more predictable and immune to shocks.
Financial Sector Strengthens Shock Absorption Capacity
Significant improvements in the banking sector have been highlighted by the Bulletin as an important factor in building resilience. Years of balance sheet repair have placed the banking system in a better position to withstand potential shocks.
The gross non-performing asset (GNPA) ratio has fallen to 2.1 per cent as of September 2025. Capital adequacy ratio has remained comfortably above regulatory requirements. Liquidity has remained stable, and profitability, as captured by return on assets (RoA) and return on equity (RoE), has increased for the banking system.
Strengthening of the banking system along with the growth of non-banking financial companies (NBFCs) has supported credit growth and hence the economy, thereby strengthening the system’s capacity to withstand potential shocks.
Policy Frameworks and Diversification Support Stability
RBI has highlighted that policy frameworks have been a major contributor to strengthening the resilience in the system. The flexibility in inflation targeting (FIT), fiscal discipline under the Fiscal Responsibility and Budget Management (FRBM) Act, and tax reforms such as the Goods and Services Tax (GST) have strengthened the policy frameworks in the system.
In addition, the economy has become better insulated from external risks such as oil price shocks. This is because the oil intensity of GDP has fallen over time, and this reduces the impact of global price fluctuations on the external sector. Better resilience in agriculture and lower volatility in sectoral growth have also added to stability.
Need For Buffers And Stabilisation Mechanisms
Despite an improvement in the macroeconomic fundamentals, the RBI has cautioned that emerging market economies (EMEs, including India) remain vulnerable to risks such as capital flow reversals and global policy uncertainty.
The Bulletin has placed emphasis on the need to build adequate buffers, such as fiscal space, forex reserves, and financial sector strength, to tackle these risks. Moreover, the effectiveness and timeliness of these policies have also increased with the help of buffers built during periods of stability.
In this context, RBI has underlined the need to build a stabilisation approach to build preparedness to counter external shocks while sustaining the growth momentum.
Outlook Anchored In Stability And Predictability
RBI has pointed out that the economy’s ability to achieve high and stable growth, while also lowering the volatility in key macroeconomic variables, reflects structural strengthening in the economy.
The macroeconomic variables and economic outcomes, such as growth and inflation, have remained within a narrower range compared to earlier decades. The Bulletin has pointed out that these outcomes reflect macroeconomic stability and consistency in policies.
The Bulletin has also pointed out that the economy has built resilience through structural and systemic transformations. At the same time, it underlines the need to build and maintain buffers in the face of global uncertainties.
