New Delhi: India’s economy continued to show resilience amid a challenging global environment, although some early signs of stress emerged in March 2026, according to the Ministry of Finance’s Monthly Economic Review for May 2026.
The review noted that high-frequency economic indicators largely reflected steady economic activity despite continuing global uncertainty. However, it flagged emerging pressures from elevated crude oil prices, tighter global financial conditions, and slowing growth across major economies.
The ministry published the detailed report on its X account.
Industrial activity presented a mixed picture during the period. The Index of Core Industries contracted marginally by 0.4% in March 2026. Despite the decline, infrastructure and manufacturing sectors maintained underlying momentum, supported by strong performances in cement, steel, and electricity generation, which continued to drive infrastructure and construction-related demand.
Inflation remained broadly under control, with retail inflation easing to 3.4% in March 2026. At the same time, wholesale inflation increased during the month, indicating the emergence of cost-push pressures in parts of the economy.
The review said liquidity conditions remained comfortable, while bank credit growth continued to be broad-based and steady. Credit expanded by 17.1% year-on-year as of March 2026, reflecting sustained lending activity across sectors.
To support sectors affected by spillover effects from the West Asia conflict, the government introduced several measures. These included approval of the Emergency Credit Line Guarantee Scheme 5.0, which provides Rs 2.55 lakh crore in support for micro, small, and medium enterprises and airlines.
The government also launched the Coal/Lignite Gasification Scheme with an outlay of Rs 37,500 crore. The scheme aims to reduce dependence on imported industrial inputs by promoting domestic production of synthesis gas and downstream products such as ammonia, urea, and methanol.
India’s external sector remained resilient during the period. Strong growth in merchandise and services exports helped narrow the country’s trade deficit in April 2026, according to the review.
Foreign direct investment inflows reached a record USD 94.5 billion in FY26, reflecting sustained investor confidence in the Indian economy. The review also noted that foreign exchange reserves remained at comfortable levels.
Labour market indicators pointed to a stable employment environment, with steady labour force participation and employment levels. Hiring activity across the manufacturing and services sectors also remained robust.
The ministry said India’s near-term economic outlook remains cautiously resilient. It highlighted strong services exports, adequate foreign exchange reserves, and a stable labour market as key factors supporting growth.
However, the review cautioned that rising crude oil prices, tighter financial conditions, and weakening growth momentum in major global economies could pose challenges to India’s growth prospects in the coming months.
