New Delhi, Jan 1 || Despite an uncertain and challenging global economic backdrop, the Indian economy continues to grow strongly, underpinned by robust domestic demand, benign inflation, and prudent macroeconomic policies, the Reserve Bank of India (RBI) has said.
The domestic financial system remains robust and resilient, bolstered by strong balance sheets, easy financial conditions, and low financial market volatility. Nonetheless, there are near-term risks from external uncertainties - geopolitical and trade related, the Central Bank said in its latest Financial Stability Report (FSR).
According to the report, global economy has been resilient, supported by fiscal measures, front-loaded trade, and strong AI-related investment. However, downside risks persist due to still elevated uncertainty, high public debt, and the risk of a disorderly market correction.
“Global financial markets appear strong on the surface but show growing underlying vulnerabilities. Sharp rise in equities and other risk assets, the expanding role of non-bank financial intermediaries and their deepening interconnectedness with banks, and the growth of stablecoins all heighten global financial system fragilities,” it mentioned.