New Delhi, May 22: In the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a "connector country" that can become a key intermediary in sectors such as technology, digital services, and pharmaceuticals, according to the Reserve Bank of India (RBI).

Indian economy continues to be ring-fenced by stability encompassing monetary, financial and political stability; policy consistency and certainty; congenial business environment; and strong macroeconomic fundamentals along with a policy ecosystem that is transparent, rule-based, and forward-looking, said the ‘State of the Economy’ report by the central bank.

According to IMF projections of April 2025, India is projected to remain the fastest-growing major economy this year and is likely to surpass Japan this year to become the world's fourth-largest economy.

Inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26. Consumers and businesses remain confident, supportive for a strengthening of economic activity.

Moreover, the measures undertaken by the Reserve Bank since January 2025 have significantly eased liquidity conditions and calmed financial markets. System liquidity has remained in surplus since end-March 2025.

Amidst uncertainties on global capital flows, it is noteworthy that domestic institutional investors (DIIs) have surpassed FPIs in ownership of Nifty-500 companies in March 2025.

This marks a structural shift in Indian equity markets as DIIs, including mutual funds and insurance companies, increasingly offset the volatility caused by FPIs, with retail and systematic investment plan (SIP) flows providing a steady long-term investment base.

Domestic financial markets sentiments have witnessed a turnaround amidst easing India-Pakistan tensions, an improvement in the global trade scenario, and softer domestic inflation, said the Reserve Bank.

According to the RBI, in this scenario, the recent completion of a free trade agreement with the UK points to a strengthening of bilateral trade linkages.

"Going forward, notwithstanding the daunting challenges on the horizon, India stands well-positioned to navigate the ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth."

--IANS

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