India’s economy shows resilience amid geopolitical uncertainty, says RBI deputy governor
India’s economy has remained resilient despite geopolitical tensions, supply-chain disruptions and volatile commodity prices, supported by strong industrial and services activity, broad-based demand and improving corporate performance, RBI Deputy Governor Swaminathan J said.In a speech at the School of International and Public Affairs (SIPA), Columbia University, the Deputy Governor said inflation remains within the Reserve Bank of India’s tolerance band and external-sector vulnerabilities are manageable.“We meet at a time when the global policy conversation is again crowded with large themes: geopolitics, climate change, artificial intelligence, technological disruption and the reordering of supply chains,” Swaminathan said in his address on Monday.The Reserve Bank posted the speech, titled ‘Resilience by Design: Lessons from India’s Banking Sector’, on its website on Wednesday.
Economy showing resilience
Highlighting India’s macroeconomic position, Swaminathan said the economy has continued to perform strongly despite an uncertain global backdrop.“Even amid geopolitical uncertainty, supply-chain disruptions and volatile commodity conditions, domestic economic activity has shown resilience, supported by strength in industrial and services activity, broad-based demand and improving corporate performance,” he said.He added that India currently stands on a relatively strong macroeconomic footing, with inflation remaining within the RBI’s tolerance band and external vulnerabilities under control.
Stronger banking system
Swaminathan said the Indian financial system is entering the current phase of global uncertainty from a position of strength.The banking sector, he noted, has healthier balance sheets, comfortable capital buffers, improved profitability and non-performing assets at multi-decade lows.“But it has one distinct feature: when it is absent, its importance is immediately recognised. A weak banking system can quickly transmit stress from financial balance sheets to firms, households, public finances and the broader economy,” he said while underlining the importance of banking resilience.According to the Deputy Governor, resilience does not emerge automatically from economic growth or favourable conditions.“It has to be designed at multiple levels: in the rules that govern banks, in the supervisory systems that detect vulnerabilities, in the resolution architecture that addresses stress, and in the behaviour of banks themselves,” Swaminathan said.
Resilience is a continuous process
The Deputy Governor emphasised that banking resilience should not be viewed as a one-time achievement but as an ongoing institutional effort.“As India’s recent experience has shown, it is built through discipline across the balance sheet and beyond, transparent recognition of stress, balance sheet strengthening, calibrated and adaptive regulation, and responsible conduct within banks,” he said.He added that strong banks require more than capital and technology.“Strong banks require capital and technology, but they also require judgment, governance, accountability and institutions that learn,” Swaminathan said.He noted that India’s recent experience demonstrates that resilience is strongest when regulation, supervision, resolution mechanisms and prudent banking practices reinforce one another.
