Anchored inflation expectations too have supported stable consumption patterns in India, stated Sanjay Malhotra, Governor, Reserve Bank of India at the FIBAC 2025 Conference today. He noted that Indian economy today is characterised by robust macroeconomic fundamentals. The economy rebounded strongly post-COVID and recorded an average annual growth of around 8 per cent during the last four years (2021-22 to 2024-25), supported by strong domestic demand – both private consumption and fixed investment - amidst challenging global economic conditions. The IMF has projected that India will be the fastest growing major economy.
India’s fiscal situation too has seen significant improvement after the post-COVID counter-cyclical fiscal response with a focus on the quality of expenditure. The union government’s fiscal deficit to GDP ratio is budgeted to moderate from a high of 9.2 per cent to 4.4 per cent of GDP in 2025-26. Quality of expenditure has improved. Central government’s effective capital expenditure which includes capital grants-in-aid to the states is budgeted at 4.3 per cent of GDP for 2025-26. Corporate balance-sheets are healthy. Banks are well capitalised, with sufficient liquidity buffers, robust asset quality and reasonable profitability. My compliments to the industry, especially the banking sector for this impressive performance.
However, proactive policy measures by the Reserve Bank, including timely interest rate adjustments and liquidity management, alongside prudent supply side measures by the government, have helped contain generalisation of price pressures. Anchored inflation expectations too have supported stable consumption patterns and improved investor confidence. The primary objective of monetary policy in terms of price stability has significantly contributed to the strength of India's macroeconomic fundamentals.