India is expected to remain the world's fastest growing major economy in FY26, the Reserve Bank of India (RBI) said in its annual report released on Thursday. The RBI added that this expectation is due to strong economic fundamentals, a healthy financial sector and a focus on sustainable growth.

GDP growth may slow down slightly, but inflation will remain low, the central bank said. However, the RBI warned of global risks that could impact growth. These include volatility in financial markets, geopolitical tensions, trade issues, supply chain issues and weather-related disruptions. These factors could push up inflation.

At the same time, the RBI said some global trends are helping. Supply chain pressures are easing, global commodity prices are falling and a strong monsoon is expected to boost agricultural production. These factors may help to keep inflation under control.

The RBI also mentioned concerns about changes in tariff policies, which could lead to short-term market volatility. The RBI added that global trade tensions could weigh on exports. Strong services exports and remittances from overseas Indians will help control the current account deficit.