Indian economy remains strong, private investment momentum sustained in RBI Bulletin

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Highlights

According to the RBI September 2026 Bulletin, India’s merchandise trade deficit is narrowing due to strong export growth, while the current account deficit remains stable.
Headline inflation stood at 4.8 percent in August, while rising fuel, food and beverage prices and FDI inflows pushed foreign exchange reserves to record highs.
Private-sector potential capital expenditure is estimated to reach Rs 3.2 lakh crore in 2026-27, with the power sector attracting the most capital.

This article was translated from the original. Read the original version by our correspondent here.

Economic outlook in the September Bulletin

According to the Reserve Bank of India (Reserve Bank of India) September 2026 Bulletin, the monthly publication includes seven speeches, three articles and the latest statistics, focusing on the state of the economy, the credit-deposit gap and private corporate investment. The Bulletin states that despite global turmoil, India’s merchandise trade deficit is narrowing on the back of strong export growth, while the current account deficit remained moderate in the first quarter.

According to the Bulletin, headline inflation rose to 4.8 percent in August, driven by increases in the food and beverages group as well as fuel and core components. Surplus liquidity in the system is increasing following FCNR(B) deposit inflows, while foreign exchange reserves are reaching all-time highs, supported by strong FDI inflows.

Credit-deposit trends and investment signals

According to one article included in the Bulletin, bank credit growth has been significantly faster than aggregate deposit growth since FY 2023, pushing the credit-deposit ratio above 80 percent. The article concludes that this ratio alone may not be an appropriate measure of funding vulnerability in a banking system with high credit growth, as banks decide on credit expansion based on profitability, the regulatory framework and risk-adjusted returns.

The article also states that the elevated credit-deposit ratio by the end of March 2026 reflects liability-side adjustments, greater borrowing at relatively lower costs and higher capital. At the same time, changes in asset composition, including the redeployment of reserve funds and other balances, have also supported credit flows.

A second article on private corporate investment states that both the total cost and number of projects sanctioned by banks and financial institutions are rising in 2025-26, indicating an improvement in investment activity. Infrastructure, particularly the power sector, is attracting the largest share of proposed capital investment, while potential private-sector capital expenditure in 2026-27 is estimated at Rs 3.2 lakh crore across all financing channels, indicating that investment momentum is likely to continue.

Our earlier report discussed the decline in India’s merchandise trade deficit in August 2026 and the possibility that the current account deficit could be close to 1.5% of GDP in the second quarter of FY 2027. That analysis also noted that a softer trade deficit could support the rupee’s movement and investor sentiment, while it will remain important to monitor the direction of external financing and reserves.

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