RBI says Indian economy stays strong despite West Asia turmoil

Indian economy remained resilient in the first quarter of FY2026‑27, posting strong GDP growth even as the West Asia conflict pushed crude oil prices higher. The Reserve Bank of India noted in its late‑Friday bulletin that the September escalation in West Asia sharpened oil price spikes, raising fears of supply‑chain disruptions and added inflation pressure. At the same time, higher sovereign yields in several advanced economies strained government finances, but domestic demand held firm. High‑frequency data through August showed continued strength in both industry and services, signalling sustained consumer and business activity. Inflation, however, began to show upward pressure: headline CPI rose in August 2026 and core inflation, which excludes precious metals, climbed from the ultra‑low levels seen in recent months. On the balance‑sheet side, the RBI said a special deposit scheme for non‑resident Indians lifted foreign exchange reserves to a record $766 billion as of 18 September, enough to cover 11.2 months of goods imports and more than the total external debt owed at the end of March 2026. Flows into FCNR‑B accounts added liquidity, speeding deposit growth and likely supporting the ongoing credit‑expansion cycle. Despite geopolitical tensions in West Asia and weather‑related uncertainties, the central bank said India’s financial and external sectors continued to draw strength from the real economy, though they remain vulnerable to these downside risks.