India set to remain fastest growing major economy in FY26: RBI

The country is poised to remain the fastest growing major economy in the world even in FY26, the Reserve Bank said in its annual report on Thursday (May 29).

The benign inflation outlook and a “moderation” in GDP expansion warrant the monetary policy to be supportive of growth going forward, the RBI said in the report.

“...the Indian economy is poised to remain the fastest-growing major economy in 2025-26 by leveraging its sound macroeconomic fundamentals, robust financial sector, and commitment towards sustainable growth,” the RBI said in the latest report.

Positive outlook despite challenges

The report also reiterated the bumper dividend of Rs 2.69 lakh crore earned by the central government because of the 8.20 per cent year-on-year rise in the size of the central bank’s balance sheet as on March 31, 2025.

However, the report flagged global financial market volatility, geopolitical tensions, trade fragmentation, supply-chain disruptions, and climate-induced uncertainties as factors posing downside risks to the growth outlook and also upside risks to the inflation outlook.

Yet, factors such as the easing of supply-chain pressures, softening global commodity prices, and higher agricultural production on above-normal south-west monsoon augur well for inflation outlook, the central bank said.

Also read: RBI's bumper dividend eases fiscal position, to help bolster growth: SBI report

Trade pacts to ease impact

Shifts in tariff policies may result in sporadic episodes of volatility in financial markets, it said, adding that exports may encounter headwinds on “inward-looking policies and tariff-wars”.

The trade pacts being signed and negotiated by India will help ensure that the impact is limited, the RBI said, adding that services exports and inward remittances will help ensure that the current account deficit is “eminently manageable” in the new fiscal.

The RBI, which has already lowered key policy rates in two consecutive reviews, said in the annual report that there is now a “greater confidence” on durable alignment of headline inflation to the 4 per cent target over a 12-month horizon.

Considering the dynamic nature of the interest rate risk, banks need to address both trading and banking book risks, especially in light of moderation in net interest margins, it recommended.

Gold and investments

Regarding its balance sheet, the report said that the increase on assets side was due to rise in gold, domestic investments, and foreign investments by 52.09 per cent, 14.32 per cent and 1.70 per cent, respectively.

Income for the year increased by 22.77 per cent and expenditure rose by 7.76 per cent.

“The year ended with an overall surplus of Rs 2,68,590.07 crore as against Rs 2,10,873.99 crore in the previous year, resulting in an increase of 27.37 per cent,” it said.

The balance sheet of the RBI reflects activities carried out in pursuance of its various functions, including the issuance of currency as well as monetary policy and reserve management objectives.

Also read: Retail inflation declines to 3.16 pc in April as food prices ease

Assets and liabilities

According to the report, the size of the balance sheet increased by Rs 5,77,718.72 crore, or 8.20 per cent, from Rs 70,47,703.21 crore as on March 31, 2024 to Rs 76,25,421.93 crore as on March 31, 2025.

On the liabilities side, the RBI said expansion was due to increase in notes issued, revaluation accounts, and other liabilities by 6.03 per cent, 17.32 per cent and 23.31 per cent, respectively.

Domestic assets constituted 25.73 per cent while foreign currency assets, gold (including gold deposit and gold held in India) and loans and advances to financial institutions outside India constituted 74.27 per cent of total assets as on March 31, 2025 as against 23.31 per cent and 76.69 per cent, respectively, as on March 31, 2024.

A provision of Rs 44,861.70 crore was made and transferred to the Contingency Fund (CF).

(With agency inputs)