Geopolitical headwinds, elevated uncertainty pose downward risks to growth: RBI's Financial Stability Report

Reserve Bank of India

The Reserve Bank of India's (RBI) Financial Stability Report released on June 30 said that the headwinds from protracted geopolitical tensions, elevated uncertainty and trade disruptions, and weather-related uncertainty pose downside risks to growth.

The report added that deceleration in global growth will act as a drag on domestic output.
"It is estimated that a 100 basis points (bps) slowdown in global growth can, ceteris paribus, pull down India’s growth by 30 bps," the report said.

The RBI has projected the real GDP to grow at 6.5 percent in 2025-2026, the same as in 2024-25, supported by buoyant rural demand, revival in urban demand, an uptick in investment activity on the back of above-average capacity utilisation, the government’s continued thrust on capex and congenial financial conditions.

Domestic inflation has been steadily declining with the headline consumer price index
(CPI) inflation recording a six-year low of 2.8 per cent in May 2025, RBI said.

The outlook for food inflation remains favourable on account of softening prices and robust crop production. Moreover, the risk of imported inflation largely remains low with the anticipated slowdown in global growth likely to soften commodity and crude oil prices, although the recent escalation of geopolitical tensions in the Middle East has led to heightened uncertainty.