External uncertainties may trigger outflows, Fx rate volatility: RBI

The Reserve Bank of India (RBI) has cautioned that the country's economy faces near-term risks largely from external uncertainties, including the possibility of a sharp correction in US equities that could trigger foreign portfolio outflows, heighten exchange rate volatility and tighten domestic financial conditions.

- MANOJIT SAHA

In its Financial Stability Report, December 2025, released on Wednesday, the central bank said that despite these risks, the Indian economy and its financial system have adequate buffers to withstand adverse shocks.

While global financial stability risks remain elevated even as the world economy displays a mix of resilience and fragility, the RBI said India continues to grow at a robust pace, underpinned by strong domestic demand. A sharp moderation in inflation, a commitment to fiscal consolidation and prudent macroeconomic policies are, it added, strengthening the economy's resilience.

"There are, however, a few near-term risks to the Indian economy despite sound macroeconomic fundamentals and robust growth-inflation dynamics," the report said.