India to remain fastest-growing economy this fiscal, RBI says

India is poised to remain the fastest growing major economy in fiscal 2026 by leveraging its sound macroeconomic fundamentals, robust financial sector and commitment towards sustainable growth, the Reserve Bank of India’s (RBI’s) annual report released on Thursday said.

Backed by proactive policy measures and strong fundamentals, the economy exhibited resilience in fiscal 2025 despite protracted geopolitical tensions and geoeconomic fragmentation, RBI’s Annual Report for 2024-25 said.

“The strength of the financial sector, reflected in improved asset quality and well-capitalized banks, further supported economic activity. Amid multiple global headwinds, the Indian financial markets demonstrated resilience and orderly movements,” it said.

In its report, RBI flagged global financial market volatility, geopolitical tensions, trade fragmentation, supply-chain disruptions and climate-induced uncertainties as factors posing downside risks to the growth outlook and also upside risks to the inflation outlook.

On the other hand, easing of supply-chain pressures, softening global commodity prices and higher farm production on an potential above-normal monsoon augur well for inflation outlook, it said.

Financial markets may face occasional turbulence due to global uncertainty, especially over trade tariffs. India’s exports could be hit by rising geopolitical tensions, protectionist moves, and the risk of tariff wars among major economies, the report said.

However, India’s trade with partner countries may get a boost from 14 free trade agreements and six preferential trade agreements (which offer limited tariff cuts for select goods).

New trade talks with the US, Oman, Peru, and the European Union could further support growth. Meanwhile, strong earnings from services like IT and steady inflows of money sent home by Indians abroad are likely to help keep the country’s trade gap under control in 2025–26, it added.

The Reserve Bank, which has lowered key policy rates in two consecutive reviews, said there is now a “greater confidence” on durable alignment of headline inflation to the 4% target over a 12-month horizon.

Giving details of its accounts for 2024-25, RBI said the size of its balance sheet as on 31 March 2025 rose 8.20% year-on-year.

Income for the year rose by 22.77%, while expenditure increased by 7.76%.

The year ended with an overall surplus of Rs2.69 trillion as against Rs2.11 trillion in the previous year, an increase of 27.37%.

“The size of the balance sheet increased by Rs5,77,718.72 crore, 8.20% from Rs70,47,703.21 crore as on 31 March 2024 to Rs76,25,421.93 crore as on 31 March 2025,” the report said.

The RBI board last week approved the transfer of a record ₹2.69 trillion as surplus to the government for fiscal 2025.

The amount is 27.5% higher than the transfer of ₹2.11 trillion in FY24, but lower than some market estimates.