India increasingly positioned to function as a 'connector country': RBI

IANS May 22, 2025 424 views

India is emerging as a pivotal economic powerhouse with remarkable growth projections and strategic global positioning. The Reserve Bank of India's latest report underscores the nation's potential to become a critical connector in technology, digital services, and pharmaceutical sectors. Domestic investors are playing an increasingly significant role in stabilizing equity markets, offsetting foreign portfolio volatility. With strong macroeconomic fundamentals and policy consistency, India is poised to become a key driver of global economic expansion.

"India stands well-positioned to navigate the ongoing global headwinds with confidence" - RBI State of Economy Report
India increasingly positioned to function as a 'connector country': RBI
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).

Key Points

1

India projected to become world's 4th largest economy by 2025

2

Domestic investors now dominate equity market landscape

3

Inflation pressures significantly easing across economic sectors

4

Free trade agreements strengthening international economic partnerships

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."

Reader Comments

R
Rahul K.
This is fantastic news! India's position as a connector country is well-deserved given our skilled workforce and digital infrastructure. The fact that DIIs are now surpassing FPIs shows growing domestic confidence in our economy. Jai Hind! 🇮🇳
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Priya M.
While the economic indicators look positive, I hope this growth translates to better opportunities for middle-class families. The inflation numbers are promising, but we need to see more job creation in manufacturing sectors too.
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Amit S.
The FTA with UK is a game-changer! Our pharma and IT sectors will benefit tremendously. But we must ensure our small businesses aren't left behind in this growth story. Make in India should mean make for all Indians.
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Sunita R.
RBI's report is encouraging, but I worry about regional stability. The mention of easing India-Pakistan tensions is good, but we must remain vigilant. Economic growth needs peaceful borders. Our soldiers' sacrifices shouldn't be forgotten in this progress narrative.
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Vikram J.
Becoming 4th largest economy is great, but per capita income matters more for common people. Hope this growth reaches villages and small towns too. Digital India has potential to bridge urban-rural divide if implemented properly.
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Neha P.
As someone working in tech, I can see India's potential as a digital connector country. But we need better IP protection laws and infrastructure in tier-2 cities to truly capitalize on this position. The world is looking at us - let's not miss this chance!

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Tags:
India Economy RBI Global Trade Economic Growth Investment Shaktikanta Das Narendra Modi