India's Economic Resilience Sustained By Strong Domestic Demand And Services

The Reserve Bank of India's July Bulletin highlights that India's economic resilience remains intact despite persistent global headwinds. Growth momentum through June was primarily sustained by healthy domestic demand and strong performance across industrial and services sectors. While retail inflation saw a slight uptick, core inflation remains low, providing a stable foundation for continued economic activity.

India's external sector is bolstered by rising foreign investment inflows, with FPIs turning net buyers in recent months, signalling renewed global confidence. The HSBC Flash India Composite PMI rose to 60.7 in July, with the Manufacturing PMI reaching its highest level in nearly 17-and-a-half years. This data suggests that the private sector is expanding rapidly, even as inflationary pressures from input costs continue to rise.

Outward remittances under the Liberalised Remittance Scheme (LRS) increased by approximately 3.6% year-on-year, reflecting growing interest in overseas investments. Liquidity conditions have improved, supporting robust credit growth across the banking system. While the pace of expansion in services activity softened slightly, the overall economic trajectory remains positive, supported by a combination of manufacturing strength and global demand. This structural stability provides a buffer against the volatility currently observed in equity markets.