Indian Economy Resilient Despite Global Headwinds: Finance Ministry

The Union Finance Ministry has said that India’s economic outlook remains upbeat, backed by strong domestic demand, easing inflation, and a steady jobs scenario, even as global uncertainties continue to pose challenges. The ministry’s Monthly Economic Review for May 2025, released by the Department of Economic Affairs, reflects cautious optimism for the Indian economy in FY26.

“India continues to show resilience in the face of global turbulence,” the report stated, crediting easing inflation, a healthy external sector, and strong rural and urban consumption trends for the sustained growth momentum.

In FY25, India’s real GDP grew by 6.5%, in line with earlier projections, despite global headwinds such as geopolitical tensions and trade disruptions. The report highlights a rebound in rural demand, solid investment activity, and an improved trade balance as key factors supporting growth. On the supply side, the services sector led the expansion, followed by robust industrial activity, especially in construction and manufacturing. The agriculture sector also made a strong comeback due to a favourable monsoon and record food grain output.

The review noted that the initial indicators for FY26 suggest continued economic stability. Key data points like fuel consumption, e-way bill generation, and PMI indices point to sustained activity. Rural consumption, in particular, has gained strength thanks to a good rabi harvest and a promising monsoon outlook. Urban spending, too, remains healthy, driven by rising travel and hospitality trends.

However, the report flagged some softening in areas such as construction inputs and vehicle sales. It also cautioned that despite largely positive domestic trends, global issues could still impact India’s trajectory. Volatility in financial markets during early 2025, triggered by escalating trade tensions, was cited as a key concern.

Retail and food price inflation declined in May 2025 due to effective government measures and improved agricultural output, the review noted.

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