Indian financial markets show resilience amid global turbulence
Reserve Bank of India Governor Sanjay Malhotra highlighted the resilience and resurgence of Indian financial markets. Speaking at the FIMMDA-PDAI Annual Conference, he outlined India's robust economic performance amidst global challenges and detailed measures for market development.
India's robust growth defies global headwinds
Reserve Bank of India Governor Sanjay Malhotra affirmed India's remarkable economic resilience amidst a challenging global backdrop.
India has consistently been among the fastest-growing major economies, recording an average growth of 8.2 percent during 2021-25, with an estimated 7.6 percent in 2025-26 and a projected 6.9 percent for 2026-27. Domestic demand, supported by strong consumption and public investment, remains robust.
Inflation has largely stayed within the monetary policy tolerance band, with headline inflation recently below the 4 percent target.
The nation is also on a firm path of fiscal consolidation, bolstered by GST adoption and improved tax buoyancy.
India's banking and NBFC sectors have significantly strengthened their balance sheets, showing improvements in capital adequacy, asset quality, and profitability.
Corporate balance sheets have also improved.
Foreign exchange reserves remain comfortable, providing 11 months of import cover, and gross FDI has been encouraging, growing to over USD 80 billion during 2024-25. This performance is underpinned by strong macroeconomic fundamentals and structural reforms.
Navigating global uncertainties, fostering market growth
Governor Malhotra outlined significant global challenges, including geo-economic fragmentation, high public debt, stretched asset valuations, and the rapid expansion of private credit markets.
He also noted AI uncertainty and escalating geopolitical tensions in West Asia.
Despite these headwinds, India's financial markets have matured considerably due to conscious policy choices.
Key development measures include an agile money market liquidity framework, broadening the investor base for government securities, and an evolving regulatory framework for derivatives to facilitate wider participation.
Market infrastructure has been strengthened through electronic trading platforms, expanded central clearing for FX forwards, and initial margin regulations.
Transparency has been enhanced, and foreign investor ease has been facilitated by easing FPI norms and expanding the Voluntary Retention Route.
Unfinished business, shared responsibility
Despite significant progress, Malhotra identified several areas for improvement, including enhancing liquidity across all government securities tenors and diversifying OTC derivatives markets.
He stressed the need for Indian banks to evolve as global market-makers and for better utilisation of the FX Retail platform.
Strengthening financial resilience is a collective responsibility, requiring market participants to ensure fair access and uphold market integrity alongside regulators.