“The global economy continues to face heightened uncertainty amid geopolitical tensions and evolving trade and financial conditions, with risks to the outlook remaining tilted to the downside,” the Ministry said in its monthly economic review report.
“While global crude price fluctuations from geopolitical events and potential El Niño weather patterns are being carefully monitored, the domestic inflation outlook remains cautious and structurally well-supported, anchored by active measures to support price stability, robust agricultural commodity procurement and targeted contingency plans in place,” it said.
Even as geopolitical frictions persist and impact trade and cross-border capital flows, India’s external sector exhibits notable resilience. Strong export performance, a services trade surplus, and consistent remittance flows have strengthened the current account, it said.
The recent policy measures will provide an impetus to capital inflows in the near term. Together with adequate foreign exchange reserves, these factors are expected to reinforce the external sector’s resilience, the report said.
India’s economic outlook remains underpinned by resilient domestic fundamentals, continued policy support, and strengthening structural drivers of growth, it said.
Structural reforms of the last decade and infrastructure investments are contributing to growth resilience as is evident in the data for the months of March to June 2026, the report said.
However, upside risk to inflation, fiscal and current account deficits and downside risk to growth remain in the wake of persistent stand-off in the Gulf region, it warned.
Global developments related to AI and weaponisation of supply chains in general are reminders of the distance India needs to travel to achieve long-term resilience and strategic leverage, the report said.
“Swifter policy responses and their implementation are vital to encourage foreign and domestic investment in the Indian economy. Recent years have been a time for hunkering down and battening down the hatches. Coming years will be no exception,” it said.