RBI Vows to Enhance Depth of Financial Markets, Cites Resilient Indian Macroeconomic Fundamentals

India's Macroeconomic Fundamentals Remain Strong, Says RBI Governor

India's macroeconomic fundamentals remain strong, according to Reserve Bank Governor Sanjay Malhotra, who said that the country's financial markets will continue to deepen, broaden participation, and strengthen institutional frameworks.

Speaking at the 25th FIMMDA-PDAI Annual Conference in Amsterdam on Friday, Malhotra noted that the global financial system is navigating through a period of elevated uncertainty and challenges, which have implications not just for the real sector but also for the financial markets. Geo-economic fragmentation caused by tariffs, trade restrictions, and industrial policies are reshaping global supply chains, affecting the free movement of capital, and leading to the fragmentation of financial flows.

The recent escalation of geopolitical tensions in West Asia has also had a significant impact on the global economy, with energy prices rising sharply amidst damage to energy infrastructure and disruptions in supply chains. This has already affected economic activity, and if the crisis persists longer, it may also translate into second-order inflationary pressures.

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Despite these challenges, India's economic resilience has been strong, with domestic demand supported by strong consumption and public investment. The government's emphasis on capital expenditure has helped crowd in private investment and improve productive capacity. As a result, India has recorded an average growth of 8.2% during 2021-25, with an estimated growth of 7.6% in 2025-26 and a projected growth of 6.9% in 2026-27.

Indian corporate balance sheets have also improved, supported by stronger earnings, and the fund mobilisation by Indian corporates through public markets has remained strong over the last two financial years. Malhotra emphasized that Indian financial markets have matured considerably over the past few years, which is an outcome of conscious policy choices over the years.

There are, however, areas that require improvement. Malhotra highlighted five key areas of focus for the RBI, including striving for efficiency, consumer protection, fairness, transparency, and ethical conduct. The RBI will continue to assess and meet emerging market needs, while also standing prepared to deploy appropriate policy measures to mitigate spillovers and ensure orderly market conditions.

Strengthening financial resilience is a collective and shared responsibility, and institutions such as trade repositories will need to improve data quality and availability to support risk assessment and effective policymaking.

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Malhotra also noted that high levels of public debt in several major economies is a concern, as their continued fiscal expansion has made it difficult for them to return to the path of fiscal consolidation that was expected post the pandemic-related stimulus. Additionally, geopolitical pressures are compelling a significant rise in defence spending, which could pose major challenges for fiscal sustainability. Stretched valuations in certain asset classes, particularly equities including a few tech stocks, could also have implications across markets and geographies.