India’s Finance Ministry said the economy remains “cautiously resilient” despite rising global risks from the West Asia conflict. Higher energy, transport and logistics costs are increasing inflation pressures and slowing global growth.
The conflict has disrupted energy markets, supply chains and trade routes. Many countries are facing higher import bills, weaker currencies and capital outflows, while major central banks may keep interest rates high for longer.
India’s economy continued to grow in April 2026. E-way bill generation, PMI data and electricity consumption remained strong, although core sector growth and fuel consumption showed some signs of slowing.
Retail inflation remained under control at 3.48% in April, below the RBI target. However, wholesale inflation jumped to 8.3% due to higher global energy prices, rupee weakness and base effects, raising concerns about future price increases.
The IMD has forecast monsoon rainfall at around 92% of the long period average. India has rice and wheat buffer stocks of 817.53 lakh tonnes and adequate reservoir levels, but a weak monsoon could increase food inflation and hurt rural demand.
Industrial activity moderated in April, mainly due to weakness in the hydrocarbon sector. However, cement, steel and electricity production remained strong, supported by infrastructure and construction demand. Manufacturing PMI stayed in expansion territory.
India’s exports grew strongly in April 2026, led by services exports which helped reduce the trade deficit. Gross FDI inflows reached a record USD 94.5 billion in FY26, while forex reserves remained comfortable and provided protection against global volatility.
Labour market conditions remained stable with steady employment and hiring across manufacturing and services. The government said strong services exports, forex reserves and employment provide support to the economy despite external challenges.
The Finance Ministry warned that elevated oil prices, a weaker rupee, rising input costs and possible monsoon shortfalls remain key risks. The Strait of Hormuz situation is seen as the most important factor for India’s inflation and growth outlook in FY27.
The rupee depreciated about 10% against the US dollar in FY26 and another 4.9% after West Asia tensions escalated. However, India still has strong fundamentals, including GDP growth above 7%, forex reserves of about USD 697 billion and record FDI inflows of USD 94.5 billion.
India’s Real Effective Exchange Rate (REER) fell to 92.72 in April 2026, its lowest level in over a decade and below the benchmark level of 100. The government said this makes Indian goods and services more competitive globally and could support exports in the coming years.
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