NEW DELHI, May 30: India’s macroeconomic position reflects “cautious resilience”; however, the rise in global energy prices, a depreciating rupee, rising upstream cost pressures, and the prospect of a below-normal monsoon require policy vigilance, said the Monthly Economic Review (MER) released by the Department of Economic Affairs (DEA) here on Saturday.
The monthly assessment of the Finance Ministry noted that the West Asia crisis has emerged as a major shock to the fragile global recovery, with its effects increasingly visible across energy markets, supply chains, trade routes, and global financial conditions.
“Elevated energy, transportation and logistics costs have revived inflationary pressures and renewed stagflation concerns across major economies”, the report said.
“Confronted with these pressures, major central banks are expected to maintain restrictive monetary policy stances for longer than previously anticipated, pushing sovereign bond yields in advanced economies to multi-year highs”
The report warned that prolonged disruptions to Gulf energy supplies could hamper global growth and intensify macroeconomic vulnerabilities.
“For India, these external pressures are beginning to transmit, selectively but perceptibly, into domestic economic conditions.”
Highlighting the performance of last month, MER said, “The Indian economy maintained its growth momentum in April, with E-way bill generation, PMI indices and electricity consumption remaining in expansionary territory.”
The report noted that moderation in the Eight Core Industries and fuel consumption shows that global headwinds are affecting the selected segments of domestic activity.
Inflation dynamics of April reflect a divergence between consumer prices and rising wholesale prices.
“While retail inflation increased only marginally to 3.48 per cent and remained below the RBI’s target, pressures intensified in select food items and services such as restaurants and accommodation.”
In contrast, wholesale inflation accelerated sharply to 8.3 per cent, driven primarily by elevated global energy prices, currency depreciation and low base effect.
Adding to the future risks, India Meteorological Department (IMD) predicted overall monsoon rainfall at around 92 per cent of the long-period average.
The report noted that buffer stocks of rice and wheat at 817.53 lakh tonnes and adequate reservoir storage provide a suitable cushion to foodgrains.
“However, any significant rainfall deficit coupled with current geopolitical conditions could translate into food inflation, weakening rural demand and aggregate growth”, the report warned.
Industrial activity in April moderated amid global uncertainty and weakness in the hydrocarbon sector.
“Resilience in cement, steel, and electricity generation continued to support overall momentum, reflecting sustained domestic demand from infrastructure and construction activity.”
On the external front, India’s total exports recorded strong growth in April 2026, with buoyant services exports substantially narrowing the overall trade deficit.
The report said that India also diversified its trade strategy through bilateral and strategic economic partnerships, while policy measures undertaken to manage non-essential imports.
“On the financial side, capital flows remained volatile, with FPI outflows exerting pressure on the Indian rupee. Nevertheless, gross FDI inflows remained resilient, reaching a historical peak of USD 94.5 billion in FY26, indicating continued long-term investor interest in the Indian economy,” it said.
Labour market indicators reflect a stable employment landscape with steady participation and employment levels.
The report suggested that navigating FY27 require agility across monetary, fiscal and structural dimensions to safeguard growth momentum, keeping inflation durably anchored . (UNI)