RBI Warns of Risks to India's Economic Outlook Amid Global Uncertainty

The Reserve Bank of India (RBI) has reported that the Indian economy remains resilient despite external uncertainties. The RBI's monthly economic report for July highlights healthy demand conditions and a resilient performance from the industrial and services sector.

High-frequency indicators also indicate robust industrial performance and a resilient services sector, according to the RBI. The central bank is expected to keep interest rates unchanged at its 5 August policy meeting, making it one of the few central banks in the region that has not changed policy in response to the Middle East conflict.

The southwest monsoon, which accounts for about 70% of India's annual rainfall, is a vital component of the $300 billion farm economy and has an outsized influence on food prices, rural demand, and broader economic output. The Iran war adds another risk, with India importing more than 85% of its crude oil needs, raising the risk of imported inflation.