According to the RBI’s February bulletin, “financial markets remain on edge” as these factors create volatility.
As the global economy grows at a steady but moderate pace, with varying outlooks across different countries, emerging market economies (EMEs) like India are facing significant challenges, the central bank noted.
The RBI pointed out that EMEs are experiencing pressures from foreign portfolio investors (FPIs), alongside currency depreciation triggered by the strengthening US dollar.
In India, however, there are some positive signs, RBI said.
High-frequency economic indicators suggest a “sequential pick-up in momentum” during the second half of 2024-25, and the Union Budget for 2025-26 has been designed to balance fiscal consolidation with growth objectives, the Central Bank observed.Focused on capital expenditure (capex), alongside measures to enhance household incomes and consumption, the budget aims to foster a conducive economic environment moving forward. Additionally, retail inflation dropped to a five-month low in January, largely driven by a sharp fall in vegetable prices. Yet, the RBI’s caution stems from global uncertainties, notably the looming threat of tariffs.
Former US President Donald Trump’s repeated threats to impose reciprocal tariffs on India continue to pose a significant risk to the stability of financial markets.
Content Source: economictimes.indiatimes.com