The Union Ministry of Finance said today that the outlook for the Indian economy remains positive amid global turbulence, thanks to easing inflation, a resilient external sector, and a steady employment situation. The ministry added that economic activity in the first two months of FY26 remained steady while cautioning that external challenges could hurt India’s growth potential.
“Overall, the outlook for the Indian economy remains positive, demonstrating resilience amid a turbulent global environment, supported by robust domestic demand, easing inflationary pressures, a resilient external sector, and a steady employment situation,” stated the Monthly Economic Review for May 2025, issued today by the Department of Economic Affairs.
The review underlined that India’s economic momentum continues to grow, reflecting the country’s ability to navigate complex global challenges while sustaining domestic growth drivers.
“In FY25, real GDP grew by 6.5%, aligning with the Second Advance Estimates. This growth came amid a challenging global environment marked by geopolitical tensions and trade uncertainties,” the report said.
“Robust domestic demand—particularly a rebound in rural consumption—steady investment activity, and a positive shift in net exports underpinned the economy’s resilience. The services sector continued to be the main driver of growth on the supply side,” it said.
“Industrial output also expanded, with strong growth in construction and a stable performance in manufacturing. The agriculture sector rebounded, bolstered by favourable monsoon conditions and record food‑grain production,” it added.
The review noted that the positive trajectory appears to be continuing in FY26, with initial high‑frequency indicators (HFIs) suggesting that economic activity has remained resilient. “HFIs such as e‑way‑bill generation, fuel consumption, and PMI indices point to continued resilience. Rural demand has strengthened further, supported by a healthy rabi harvest and a positive monsoon outlook,” it added.
“Urban consumption is being supported by increased leisure and business travel, as seen in the rise of air‑passenger traffic and hotel occupancy. However, there are signs of softening in areas such as construction inputs and vehicle sales,” it pointed out.
The report added that retail and food‑price inflation registered a sustained and broad‑based decline in May 2025, driven by robust agricultural production and effective government interventions.
“While domestic indicators have remained largely positive, financial markets experienced volatility as a result of external developments. The significant escalation of trade tensions in early 2025, followed by a partial de‑escalation in the second quarter, contributed to considerable volatility in the financial markets,” the review said.
The review also observed that global growth continues to face headwinds, with persistent trade frictions, heightened policy uncertainty, and ongoing geopolitical conflicts weighing on the broader economic outlook.
“These external challenges could potentially impact India’s growth trajectory and warrant close and continuous monitoring,” it said.