![\"India](\"https:\/\/static.toiimg.com\/thumb\/msid-131406908,imgsize-99926,width-400,height-225,resizemode-4\/representational-image.jpg\" "\\"Representational")
<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div><\/div>\n<\/div>\nIndia’s economic story is expected to remain on a path of “cautious resilience” in the near term, even as global uncertainties continue to grow, the department of economic affairs (DEA) said in its Monthly Economic Review for May.However, it cautioned that the ongoing conflict in the Middle East, rising crude oil prices and the possibility of a weaker-than-normal monsoon could pose challenges to growth and fuel inflationary pressures in the months ahead.Despite these risks, the DEA said the domestic economy remains on a strong footing. Manufacturing and services activity continue to expand, labour market conditions remain stable, and India’s robust foreign exchange reserves provide a crucial buffer against external shocks.“The near-term outlook for the Indian economy is one of cautious resilience,” the Department of Economic Affairs noted.“Domestic fundamentals remain broadly intact, manufacturing and services PMIs are in expansionary territory, the labour market is stable, and foreign exchange reserves provide meaningful insulation against external shocks.”<\/p>\n However, it said the global situation has become more difficult since the start of the Middle East conflict.The report noted that higher crude oil prices and slowing growth in major economies are creating challenges that India “cannot fully insulate itself from.”The review also flagged concerns over inflation. While retail inflation remained low at 3.48% in April 2026 and stayed below the RBI’s target, wholesale inflation jumped to 8.3%.“The current divergence between retail inflation and wholesale prices signals that upstream cost pressures are building, and the passthrough to consumers, while limited so far, may not be far behind,” it said.According to the department, wholesale prices have risen due to higher global energy prices, currency depreciation and a low base effect. It also warned that the recent increase in petrol and diesel prices “may activate both direct and indirect transmission channels,” potentially pushing up costs across the economy.A weaker monsoon could add to these pressures by driving up food prices, the review said.<\/p>\n Despite these concerns, several parts of the economy continued to perform well. The department said cement, steel and electricity generation remained strong in April, supported by demand from infrastructure and construction projects.“Resilience in cement, steel, and electricity generation continued to support overall momentum, reflecting sustained domestic demand from infrastructure and construction activity.”The HSBC India Manufacturing PMI remained in expansionary territory, even though businesses faced higher input costs. The report also pointed to growth in export orders, employment and investment commitments in sectors such as automobiles, semiconductors, electronics and defence manufacturing.The review highlighted that gross FDI inflows touched a record $94.5 billion in FY26, “indicating continued long-term investor interest.” Growth in services exports also helped reduce the trade deficit.<\/p>\n Looking ahead, the department said disruptions in the Strait of Hormuz remain a key concern. “The duration of the Strait of Hormuz disruption remains the single most consequential variable for India’s external and price outlook.”It also warned that monsoon performance will be crucial. With the IMD forecasting rainfall at around 92% of the long-period average, the department said “any significant rainfall deficit coupled with current geopolitical conditions could translate into food inflation, weakening rural demand and aggregate growth.”The review concluded that managing growth and inflation in FY27 will require careful policy action as global uncertainties continue.It said navigating the year ahead “will require agility across monetary, fiscal and structural dimensions to safeguard growth momentum and keep inflation durably anchored, even as the global environment remains uncertain.”<\/div>\nMiddle East conflict, oil prices add to concerns<\/h3>\n<\/p>\n
Industry, investment indicators stay strong<\/h3>\n<\/p>\n
Hormuz disruption and monsoon in focus<\/h3>\n<\/p>\n