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Indian Economy: A Pillar of Global Growth

Mumbai: The Reserve Bank of India (RBI) highlighted on Monday that the Indian economy continues to be a significant contributor to global growth, supported by solid macroeconomic fundamentals and effective policies.

In its latest Financial Stability Report (FSR), the central bank noted that ongoing uncertainties in economic and trade policies are challenging the resilience of both the global economy and financial systems.

The RBI pointed out that financial markets are experiencing volatility, particularly in core government bond markets, influenced by changing policies and geopolitical factors. Additionally, existing vulnerabilities, such as high public debt and inflated asset valuations, could exacerbate potential shocks.

Despite a challenging global economic landscape, the RBI emphasized that India's economy remains a crucial growth engine, backed by strong macroeconomic fundamentals and prudent policies.

The domestic financial system shows resilience, supported by the robust balance sheets of banks and non-banking financial institutions. Financial conditions have improved due to accommodating monetary policies and low market volatility. The strength of corporate balance sheets also contributes to overall macroeconomic stability.

The report indicates that the stability and resilience of scheduled commercial banks (SCBs) are reinforced by strong capital buffers, a historically low ratio of non-performing loans, and solid earnings.

Results from macro stress tests confirm that most SCBs maintain sufficient capital buffers above regulatory requirements, even under adverse conditions. The stress tests also affirm the resilience of mutual funds and clearing corporations.