India’s economy is holding firm even as global uncertainties persist, the Finance Ministry said in its Monthly Economic Review for May. Describing the current state as a “relative goldilocks situation,” the Ministry pointed to stable inflation, resilient growth, and a supportive policy environment as key strengths.“India’s economic momentum continues to grow, and the positive trajectory appears to be continuing in FY26,” the ministry noted, citing strong early indicators of domestic activity.
Crude oil risks recede, but caution remains
The report flagged recent geopolitical tensions, particularly the Israel-Iran conflict, as a potential threat to growth had oil prices remained elevated.Fortunately, a ceasefire has eased supply concerns.“Thankfully, oil prices have retreated sharply. There is ample global supply,” the report said. “But insurance costs and the risk of choke point disruptions could still impact prices. Therein lies the risk to India.”The Finance Ministry warned that despite the easing of immediate threats—such as a possible blockade of the Strait of Hormuz—uncertainty persists.“It is too soon to sound the all-clear for the rest of the year.”Bond markets reflect stabilityFinancial markets remained steady in May, supported by the RBI’s record surplus transfer and a solid Q4 growth reading. The government bond risk premium fell to 182 basis points by May-end, signalling market confidence.Geopolitics: A double-edged swordWhile external risks remain, the report sees a potential upside in global realignments.“Geopolitics may offer us opportunities that appeared remote previously. It is up to us to be flexible enough to ride the tide. We have to get used to doing the balancing act or the high-wire act for some time to come.”The bottom lineIndia remains better positioned than many global peers, but the ministry urges continued vigilance. “These may be nervous but exciting times for the Indian economy.”(Edited by : Akanksha Upadhyay)
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