The total cost of capital expenditure (capex) projects sanctioned by banks and financial institutions (FIs) surged in Q2FY26 over the previous
quarter pointing to improved investment optimism among private corporations, according to an article published with the Reserve Bank of India’s November bulletin. Power, construction, roads and bridges constituted the majority of the intended investment, it added.
Funds raised for capex through external commercial borrowings (ECBs) and initial public offerings (IPOs) also increased compared to the preceding quarter.
However, fresh ECB registrations moderated during the first half of the current fiscal year. Despite this slowdown, inflows continued to outpace outflows resulting in net inflows of $8 billion, and 45% of total ECBs registered during this period were raised for capex, the article noted.
Notwithstanding persiting global headwinds like trade policy uncertainties and US tariffs, India’s high-frequency indicators in October pointed to robust activity in manufacturing and services, buoyed by festive demand and the positive impact of recent Goods and Services Tax (GST) reforms, the bulletin noted.
Notably it said rural demand led the charge, with two-wheeler and tractor sales surging, while urban indicators like passenger vehicle registrations hit nine-month highs. Unemployment rates stabilised at 5.2%, with improvements in rural areas, and PMI employment indices remained in expansionary territory, it said.
What did the RBI report say?
“The fiscal, monetary, and regulatory measures undertaken so far this year should pave the way for a virtuous cycle of higher private investment, productivity, and growth, leading to long-term economic resilience,” the RBI report noted in the article “State of the Economy.”
Another article dwelt upon multivariate core trend (MCT) inflation, a measure of trend inflation which provides insight on whether the inflation dynamics are dominated by a trend common across sectors or are sector-specific. MCT inflation is found to have shown greater stability and smoother movements compared to headline and conventional core inflation, especially during periods of large supply shocks such as the pandemic and the surge in global commodity prices. “Broad-based price pressures, rather than isolated sector movements, have been the key drivers of underlying inflation in recent years, with services inflation gaining importance,” it observed. The new measure improves inflation forecasting over the medium term, offering policymakers an additional tool to monitor inflation dynamics and support decision-making, it stated.
The MCT inflation track persistent price pressures in the economy, and looks beyond temporary price swings in food and fuel and focuses on lasting inflation trends.
To encourage financial innovation: Guv
The Reserve Bank of India is encouraging innovation while being mindful of the regulatory objective of safeguarding systemic stability, governor Sanjay Malhotra said in an article with the central bank’s latest monthly bulletin.
“We are trying to simplify regulations where possible while maintaining necessary safeguards, strengthening coordination with other regulators while respecting jurisdictional boundaries, and trying to enforce rules consistently while recognizing that circumstances sometimes warrant flexibility, “ he wrote.
According to Malhotra, these tensions cannot be permanently resolved, but must be continuously managed, he noted in the piece titled “Regulation by RBI: Some Reflections.”