India's macro fundamentals strong, show notable improvement in recent years: RBI DG Poonam Gupta

India's Economic Resilience Shines Through Key Indicators

India's macroeconomic landscape is painting a picture of strength and steadiness, according to RBI Deputy Governor Poonam Gupta. Speaking at the 14th Foundation Day Lecture of the Centre for Development Studies in Thiruvananthapuram, she emphasized that most key indicators have stayed within healthy ranges for the past four decades, with clear progress in recent years. This comes at a time when global economies grapple with uncertainties, making India's position all the more noteworthy. Gupta pointed out that the economy has become more resilient to both internal and external shocks, thanks to structural changes like diversifying production and reducing reliance on oil. Per capita income has surged nearly tenfold since the 1980s, reaching around $2,700 by 2024, driven by steady GDP growth and stabilizing population trends.

These developments signal a virtuous cycle where accelerated growth feeds into greater stability, and vice versa. Inflation has moderated significantly, showing less volatility compared to many peers, while staying benign enough to support ongoing expansion. The current account deficit has hovered modestly between 0.5 and 2.2 percent of GDP since 1990, bolstered by strong services exports and remittances. Gupta noted that upcoming trade deals, such as those with the US and EU, could further fortify these inflows, enhancing the economy's external balance.

Fiscal Discipline and Financial Sector Strength Underpin Growth

Turning to government finances, Gupta highlighted the role of fiscal consolidation post-pandemic, with deficits and debt levels easing from their peaks. The quality of public spending has improved markedly, as capital expenditure now claims a larger share of the budget, fostering long-term infrastructure gains. Efforts to broaden the tax base and streamline collections have boosted direct tax revenues, even if they lag some global averages. This disciplined approach, rooted in frameworks like the Fiscal Responsibility and Budget Management Act, has built credibility and sustainability into India's fiscal story.

The financial sector tells an equally positive tale. Banks boast capital buffers well above requirements, with gross non-performing assets dropping sharply over the last decade. Profitability is up, liquidity is ample, and the system is primed to fuel credit growth without undue risks. These improvements contrast with challenges faced by other nations still wrestling with high debt or weak balance sheets. Overall, Gupta described an economy firing on multiple cylinders, less prone to overheating or excessive volatility.

A Stable Foundation for Future Prosperity

Gupta's insights underscore how India's economy has evolved into a more balanced powerhouse. Growth across sectors is steadier, inflation trends are calmer, and vulnerabilities to shocks—like oil price swings—have diminished through energy efficiency and renewables push. This stability isn't just about numbers; it sets the stage for inclusive prosperity, with per capita gains outpacing overall GDP expansion. As structural reforms continue, the momentum appears set to build.

"The resilience of India's current account deficit can be attributed to its diversified sources of inflows, which have only strengthened over time. Services exports and remittances in particular have significantly contributed to the robust inflows. It is expected that the recently announced India-USA trade deal, India-EU free trade agreement and the newly signed or prospective new trade agreements will further strengthen the current account."

In wrapping up, Poonam Gupta's assessment reaffirms India's macroeconomic health: resilient indicators, prudent fiscal management, a robust financial system, and a trajectory of stable, accelerating growth. These elements collectively position the country for stronger days ahead amid global headwinds.