India’s economy could face headwinds due to higher energy prices and supply chain disruptions, while the likelihood of El Nino conditions could hit agricultural output, the RBI said in its annual report released on Friday.
However, healthy corporate and bank balance sheets, the government’s continued thrust on capital expenditure and the implementation of trade agreements with key partners are expected to sustain investment and growth momentum.
The Reserve Bank of India (RBI) released its Annual Report for 2025-26, a statutory report of its Central Board of Directors, on Friday. It covers the working and functions of the Reserve Bank of India for the period April 2025-March 2026.
Market volatility persisted due to geopolitical risks and valuation concerns, but surged towards the end of March 2026 following the West Asia conflict. The Indian economy exhibited resilience in 2025-26 amidst several external headwinds, supported by strong private consumption, sustained investment and sound macroeconomic fundamentals.
The report said the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risk. “Going forward, India's growth outlook remains positive, though the West Asia conflict and the attendant risks of elevated energy prices, supply chain disruptions, financial market volatility, uncertainty surrounding global trade policies and weather-related disruptions could pose headwinds to growth and inflation in the short run,” it said.
The RBI also said the outlook for the agriculture sector in 2026-27 remains contingent upon the progress and distribution of south-west monsoon. The likelihood of El Nino conditions poses downside risks to agriculture output, it added.
On the price situation, the report said inflation in 2026-27 is likely to remain aligned with the target on the back of adequate foodgrain stocks, sufficient reservoir levels and stable agricultural prospects despite possible El Niño conditions and above-normal summer temperatures.
“However, the evolving upside risks to inflation may emanate from multiple other factors such as spike in global fuel and commodity prices amid geopolitical tensions, potential spillovers to input and wage costs, and volatility in exchange rate,” it said. Considering all these factors, consumer price index-based inflation for 2026-27 is projected25 at 4.6 per cent with risks tilted to the upside, the RBI said.
RBI balance sheet up 20.6 pc
Reserve Bank’s balance sheet swelled to Rs 91.97 lakh crore at the end of March 2026, up 20.6 per cent year-on-year, due to a rise in domestic investments as well as gold and foreign investments. The balance sheet size increased by Rs 15,71,699.15 crore from Rs 76,25,421.93 crore as on March 31, 2025, to Rs 91,97,121.08 crore as on March 31, 2026, the annual report for 2025-26 said.
The Increase on the assets side was due to a rise in domestic investments, gold and foreign investments by 44.9 per cent, 63.8 per cent and 7.9 per cent, respectively. As on March 31, 2026, the report said total gold held by the Reserve Bank was 880.52 metric tonnes as compared to 879.58 metric tonnes as on March 31, 2025, an increase of 0.94 metric tonnes of gold in the year.
Financial institutions report ₹48,021-crore fraud cases
The report further said banks and financial institutions, taken together, reported 10,114 fraud cases involving Rs 48,021 crore in 2025-26, against 23,722 cases involving Rs 32,803 crore in 2024-25. An assessment of bank group-wise fraud cases over the last three years indicates that although the number of frauds for public and private sectors banks has reduced, the amount involved has increased over the years. While the number of frauds was the highest under card/internet/digital payments category during 2023-24 and 2024-25, advances category accounted for the largest share in 2025-26.
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