India’s economy is well positioned to sustain its growth momentum through the remainder of FY27, despite geopolitical tensions, volatile energy prices and tightening global financial conditions, according to the Finance Ministry’s monthly economic review released on Thursday.
The report, prepared by the Department of Economic Affairs, highlighted strong industrial activity, resilient services, robust domestic credit growth and sustained investment as key drivers supporting economic expansion. Structural reforms and tax measures have also strengthened domestic demand and private investment.
However, the report cautioned that maintaining growth while safeguarding price stability will remain a key policy priority in the second half of the financial year, amid elevated crude oil prices, rising food inflation and uncertainty over the Kharif crop outlook.
Food Inflation and Oil Prices Remain Key Concerns
The ministry said near-term inflation trends will depend on domestic food supply management, global energy prices and liquidity conditions. Government interventions, including onion releases through the ‘Kanda Express’, stockholding limits on sugar dealers and reductions in Basic Customs Duty on crude edible oils, are expected to help moderate prices of essential commodities.
Nevertheless, risks persist from a potentially intensifying El Niño event, which could affect soil moisture during the upcoming Rabi sowing season, as well as increased demand during the festive period.
Elevated crude oil prices and disruptions to maritime freight routes across West Asia could further raise input costs and intensify imported inflationary pressures. Recent Reserve Bank of India measures to provide dollar liquidity directly to public-sector oil marketing companies and curb currency speculation are expected to help contain exchange-rate volatility.
The report added that the effectiveness of the recent interest rate hike in limiting secondary inflationary effects would depend on the RBI’s active liquidity management.
Forex Reserves Provide 10.3 Months of Import Cover
India’s external sector remains resilient, supported by strong merchandise export growth and a sustained surplus in services, the report said. Robust capital inflows, particularly banking capital, helped finance the wider current account deficit during April–August FY27.
Although pressure on the rupee continues, the country’s foreign exchange reserves remain adequate by standard reserve adequacy measures, providing import cover of 10.3 months.
The ministry said strong domestic demand, sustained investment, a resilient financial sector and proactive supply-side management continue to underpin India’s economic resilience. However, it stressed that continued vigilance will be essential to maintain macroeconomic stability amid persistent global uncertainties and supply-side risks.