Indian economy less vulnerable to global headwinds, says RBI in April bulletin

India's economy is relatively less vulnerable to global headwinds, and calibrated policy support could help the country turn current volatility into an opportunity, the Reserve Bank of India said in its April bulletin released on Tuesday.

"Although the dampening global economic outlook could impact India's economic growth through weaker external demand, the domestic growth engines ... consumption and investment, are relatively less susceptible to external headwinds," the RBI said in its article titled State of the Economy.

Strong domestic growth impulses and sound macro-fundamentals have helped the economy stay resilient despite global trade tensions, it said, adding that prospects for the farm sector have been boosted by above-normal monsoon forecast.

India's retail inflation slipped to a more-than-five-year low of 3.34 per cent in March as food prices continued to moderate, creating room for deeper central bank rate cuts amid fears the US-China trade war may hit global growth.

Earlier in the month, RBI lowered its key policy rate for a second consecutive time and softened its monetary policy stance. It also cut the GDP growth estimate for the current fiscal year to 6.5 per cent from 6.7 per cent.

Volatile global financial conditions could put emerging markets at risk from ripple effects and fuel another round of inflation globally, RBI said.

"Going forward, India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages," the central bank said.

"India's consistent strength in services exports and remittance inflows continues to provide a vital buffer for the current account," it added.