MUMBAI (Reuters) – Strong macroeconomic fundamentals are likely to help India sustain its growth momentum even as the global economy faces uncertainty amid the escalating trade tensions, the Reserve Bank of India said in its March bulletin on Wednesday.
“The Indian economy continues to demonstrate resilience as evident in the robust performance of the agriculture sector and improving consumption. The reverberations of a tumultuous external environment, however, are being reflected in sustained foreign portfolio outflows,” RBI said.
Foreigners have pulled nearly $29 billion out of Indian stocks since October, the most in any six-month period.
The trade wars and escalating tariffs could have a harmful impact on growth and fuel inflation, not just in the countries directly involved but for the global economy as a whole, the central bank said.
“India’s macroeconomic strength to face these challenges is bolstered by a decline in headline CPI inflation to a seven-month low of 3.6% in February on account of a further correction in food prices,” the RBI added.
The central bank also reduced rates by 25 basis points last month, its first cut in five years, and is widely seen to be cutting by a similar quantum in April to boost economic growth.
While facing challenges from weakening global trade and tariff uncertainty, India’s external sector continues to find support from resilient services exports, which remain less affected by global disruptions, the apex bank said.
India’s merchandise trade deficit in February narrowed sharply to $14.05 billion, the lowest level in more than three years, as imports fell amid rising global uncertainty.
(Reporting by Swati Bhat; Editing by Krishna Chandra Eluri)
