The Indian economy recorded robust growth of 7.8% in the first quarter of 2026-27 and demonstrated resilience through August, the Reserve Bank of India said in its latest bulletin on the state of the economy. High-frequency indicators point to continued momentum even as geopolitical tensions in West Asia push up energy prices.

Trade and external sector

Supported by strong export growth, the merchandise trade deficit narrowed during the month. A moderate current account deficit in Q1, combined with strong foreign direct investment flows, supported the external sector, and foreign exchange reserves reached an all-time high, the central bank noted.

Inflation inches up

Headline inflation inched up to 4.8% in August, driven by the food and beverages group along with a pickup in fuel and core components. System liquidity moved into a larger surplus following deposit inflows, giving policymakers room to manoeuvre.

What to watch

With energy prices volatile and financial markets choppy, the RBI’s tone is steady but watchful. For households and businesses, the near-term signals are stable growth with inflation hovering near the upper edge of comfort.