The Reserve Bank of India publishes half-yearly reports titled ‘Financial Stability Reports (FSR)’ covering various domestic economic issues along with an overview of the global economic situation. Here is a review of the December 2023 edition of the FSR report. The global and national economies and their sustainability, stability and growth have been much-debated topics in the 21 century, so much so that the 2030 Sustainable Development Goals urges its signatory nations to aim to achieve higher levels of economic productivity and sustain per capita economic growth. Since the onset of the industrial era, economic security, independence and growth of every individual and the nation have not only been perceived as one of the utmost prioritized aims to be achieved but also as an end in itself. However, history shows us that the global economy has always gone through upward and downward trends and vice-versa, due to various factors such as geo-political and financial conditions, fragmentation, etc., which have kept economies volatile. This is more so in the recent past with the disruption caused by the COVID-19 pandemic, which according to a 2021 study, has affected the global economy beyond anything in nearly a century. With the restoration of normalcy post-pandemic, the global economies started to grow again and are continuing to do so. However, nations continue to confront numerous economic challenges of both pre- and post-pandemic period. In such a scenario, the assessment of the economic stability of nations on the current date and with future projections becomes vital to formulate various measures necessary to ensure economic sustainability, security, and growth. The Reserve Bank of India (RBI) publishes half-yearly reports titled ‘Financial Stability Reports (FSR)’ covering various domicile economic issues that are prevalent on the current day, with the details showcasing the trends and various economic prospects, along with an overview of the global economic situation. In this story, we look at the global and national economic scenarios, the economic stability and the challenges which are currently faced by India, as highlighted in the recent December 2023 FSR report. FSR highlights increasing Global Debt to GDP Ratio and Volatility of Global Economy In its overview of the Global Macro Financial Outlook, the FSR notes that the global economy is faced with headwind issues such as geopolitical conflicts in the world’s biggest grain and oil supplying regions, geo-economic fragmentation, relatively tighter financial conditions, large fiscal imbalances and elevated public debt, and heightened uncertainty on the evolving economic outlook. Owning to these, the report notes that the volatility has increased in certain segments of financial markets and thus the financial stability challenges have become accentuated. Some of the important global challenges noted in the FSR are as below: Slowing Growth Rates: The FSR highlighted that as per the International Monetary Fund (IMF), the overall economic growth rate would decline from 3% in 2023 to 2.9% in 2024, which is below the average of 3.8% during the pre-pandemic period (2000-19). Along with this, the growth in World Trade is projected to fall from 5.1% in 2022 to 0.9% in 2023. Though it is projected to increase to 3.5% in 2024, it will be below the pre-pandemic (2000-19) average of 4.9%. Increasing Inflation Rates: The inflation rates across the Advanced Economy (AEs) Countries and Emerging Market Economy (EMEs) Countries were found to be above the targeted levels of December 2023, on a year-on-year (y-o-y) basis. The above graph shows that in some of the AE and EME countries, both core and headline inflation rates were above the targeted levels of inflation rates. Only Switzerland among AEs and China among EMEs had both headline and core inflation rates below the targeted levels, while the AEs like Italy and Denmark had headline inflation rates below the targeted levels. India, the EME country, had both core and headline inflation rates above the targeted levels. Mounting Public Debt: Mostly importantly, the FSR highlighted the steeping levels of outstanding public debt of both AEs and Emerging Markets and Developing Economies (EMDEs). In the year 2008, the overall Public Debt to GDP ratio was about 72% and 35% respectively for AEs and EMEDs. But it has increased steeply over the years and is projected to be about 93% and 65% respectively for AEs and EMDEs by the end of 2023. By 2028, it is further projected to increase to 116.3% and 78.1% for AEs and EMDEs, respectively.