Positive trajectory in Indian economy continues in 2025-26, all indicators indicate resilience: FinMin

NEW DELHI: The positive trajectory in the Indian economy appears to be continuing in 2025-26, with initial high-frequency indicators suggesting that economic activity has remained resilient, according to the Ministry of Finance’s monthly report, released on Friday.

High-frequency indicators 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”, the monthly economic review of the finance ministry said.

“Urban consumption is being supported by increased leisure and business travel, as seen in the rise of air passenger traffic and hotel occupancy”. However, the report noted that there are signs of softening in areas like construction inputs and vehicle sales.

Retail and food price inflation registered a sustained and broad-based decline in May 2025, driven by robust agricultural production and effective government interventions.

Continuing its downward trend, consumer price inflation in India hit an over six-year low in May, in respite to common people. According to the statistics ministry, the year-on-year inflation rate based on Consumer Price Index (CPI) for the month of May was 2.82 per cent (provisional). It is the lowest year-on-year inflation since February 2019. The inflation rate is within the Reserve Bank of India’s (RBI) manageable range of 2-6 per cent.

Retail inflation last breached the Reserve Bank of India’s 6 per cent upper tolerance level in October 2024. Since then, it has been in the 2-6 per cent range, which the RBI considers manageable.

Coming back to the finance ministry report, India’s economic momentum continues to grow, reflecting the country’s ability to navigate complex global challenges while sustaining domestic growth drivers. In 2024-25, real GDP grew by 6.5 per cent, aligning with the Second Advance Estimates.

“This growth came amid a challenging global environment marked by geopolitical tensions and trade uncertainties. 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. 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”, the report read.

On the external front, India’s total exports (merchandise and services) recorded a year-on-year growth rate of 2.8 per cent in May 2025, reflecting the resilience of exports amid tariff uncertainties and subdued global economic conditions.

As of June 13, 2025, foreign exchange reserves remain strong, standing at $699 billion, which provides an import cover of 11.5 months. Additionally, the Indian rupee has experienced moderate volatility, in contrast to the more pronounced adjustments observed in other economies, the ministry said.

The labour market indicators show signs of stability. “White-collar hiring witnessed a rise in hiring with core sectors such as AI/ML professionals, Insurance, Real Estate, BPO/ITES, and Hospitality leading the hiring growth. The employment sub-indices of the PMI indicate strong employment growth, with the employment sub-indices reaching a high. Formal job creation is also on the rise, as indicated by the growing net payroll additions under the Employee Provident Fund Organisation,” it added.

As was widely expected, the Indian economy grew by 6.5 per cent in real terms in the recently concluded financial year 2024-25, official data showed recently. The Reserve Bank of India had projected 6.5 per cent GDP growth for the fiscal year 2024-25.

In 2023-24, India’s GDP grew by an impressive 9.2 per cent, continuing to be the fastest-growing major economy. According to official data, the economy grew 8.7 per cent and 7.2 percent, respectively, in 2021-22 and 2022-23.

This February, the World Bank said India will need to grow by 7.8 per cent on average over the next 22 years to achieve its aspirations of becoming a developed country by 2047. However, the World Bank asserted that getting there would require reforms and their implementation to be as ambitious as the target itself.

To realise the vision of ‘Viksit Bharat’, a developed nation dream by 2047, India will need to achieve a growth rate of around 8 per cent at constant prices, on average, for about a decade or two, the Economic Survey document for 2024-25 tabled on January 31 asserted.

India has made quite a turnaround, climbing the ladder of economic growth. This can be gauged from the 11th in 2013-14, India has positioned itself to become the fourth largest economy in 2025-26. Even as India has overtaken many countries in terms of the size of the economy over the past decade, the per capita income in India however remains very low. (ANI)