Resilient growth, cautious outlook: Ministry flags slowing high‑frequency signals

New Delhi: The economy remains resilient, though moderation in some high-frequency indicators suggests a gradual easing of momentum, a Finance Ministry report said, while flagging risks from uneven monsoon rainfall, emerging El Nino conditions and geopolitical uncertainties.

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Following the robust growth performance in 2025-26, economic activity remained resilient in the initial months of 2026-27, the finance ministry said in its latest Monthly Economic Review.

"High-frequency indicators such as e-way bill generation, PMI indices, electricity consumption, and automobile sales continued to reflect underlying strength in domestic economic activity.

"At the same time, moderation in select indicators, including core industries, fuel consumption, air passenger traffic, consumer confidence, and labour market indicators, suggests some easing in momentum," it said.

As the global environment continues to evolve, inflation readings may remain relatively contained in the coming months. Recent easing in global commodity markets, a correction in crude oil prices, and softening of key input prices, such as urea, may help moderate imported inflationary pressures, it added.

Although the normalisation of global supply chains and trade flows to pre-conflict levels may take time, the ministry said the decline in international commodity prices is expected to provide some cushion against further price pressures.

Government interventions, adequate buffer stocks of key agricultural commodities, and continued supply-side management measures also help mitigate potential supply disruptions, it pointed out.

Overall, developments during the month point to continued strength in industrial activity, supported by policy reforms and investment momentum, it said, adding that the revised IIP and WPI frameworks are expected to more efficiently measure industrial and price dynamics.

The report said the external sector remains supported by strong export performance, resilient FDI inflows, and comfortable foreign exchange reserves.

The recent de-escalation of tensions in West Asia and progress in US-Iran negotiations have contributed to a correction in Brent crude oil prices, providing some relief from external and inflationary pressures. Recent progress on trade agreements and measures is also expected to further facilitate foreign capital inflows, it said.

Overall, it said, "the economy continues to exhibit resilience. However, moderation in select high-frequency indicators suggests some easing in momentum. The uneven distribution of monsoon rainfall, emerging El Niño conditions, and geopolitical uncertainties will continue to shape the outlook".

Although recent developments in West Asia have eased pressure on global energy markets, continued disruptions to oil production and shipping through the Strait of Hormuz could affect energy supplies and commodity prices, it added.

The cessation of the conflict in West Asia has brightened the outlook for growth and also reduced inflation and external deficit risks, it said, adding that India’s resilient merchandise export growth is a bright spot, and free trade agreements coming into effect should boost export growth further.

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"The longer-than- expected duration of the conflict in West Asia tested India’s resilience. Indian policymakers dealt with it with a combination of near-term and structural measures designed to enhance the country’s resilience to future energy shocks and their economic impacts. India’s macroeconomic stability held, and concerns over external stability should dissipate gradually," the report said.

Foreign debt investors have returned to the Indian sovereign debt market, and it is a matter of time before equity flows turn positive as concerns over the global AI-bubble mount, it noted.

However, the report said, the West Asia conflict was a reminder of the need for a national policy on buffer stocks for a range of critical raw materials and inputs.

"Now, attention turns to the impact of a deficient monsoon. While the monsoon rains are expected to improve in July and August, experts point to the increasing unpredictability of rainfall patterns. Among other things, water conservation, including recycling, utilisation of budgetary allocations for Jal Jeevan Mission, may now be at the top of the policy priority list," it said.

The West Asia conflict and the deficient monsoon rainfall (so far) also underscore the need to reorient India’s agricultural pricing policies to incentivise the cultivation of climate-resilient crops and disincentivise water-intensive ones, the ministry said.

The steady stream of destabilising events and developments globally and climatically is a reminder of the challenges likely to arise in the coming years and the need for policy to stay a step ahead of them, it added.

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