The global economic outlook continues to be shaped by geopolitical frictions in West Asia and fresh tariffs by the US, RBI said in its monthly bulletin.
The momentum of Q1:2026-27 continued in July with most of the high-frequency indicators reflecting sustained manufacturing and services activity, and double-digit expansion in merchandise exports and imports, it said.
The recovery in southwest monsoon in July helped in kharif sowing reaching closer to normal acreage, partly mitigating some of the risks to the agriculture sector, RBI said.
While headline Consumer Price Index (CPI ) inflation edged up above the target, it was primarily on account of supply side pressures. Stable core inflation reaffirmed the lower pass-through of cost pressures, it said.
Financial conditions are characterised by high credit growth, comfortable liquidity, and softening G-sec yields supported by rebound in capital inflows, RBI said.
High-frequency indicators continued to reflect buoyant economic activity in July. Goods and Services Tax (GST) revenue growth strengthened, driven by robust growth in tax revenue from imports, while domestic collections also recorded healthy growth, it said.
GST E-way bill generation indicated steady goods movement in July 2026. Growth in petroleum consumption rebounded, after contracting in the preceding three months, led by petrol and diesel, although aviation turbine fuel consumption remained subdued.
Delayed monsoons and high humidity drove a surge in cooling needs, leading to sustained growth in electricity demand. The monthly volume of toll transactions continued to soften with the adoption of the FASTag Annual Pass.
Digital payments registered robust growth in value, though the growth in transaction volume moderated largely due to base effect
Domestic demand remained strong in July, supported by rural demand. Retail automobile sales accelerated, led by stronger tractor and two-wheeler sales, reflecting sustained rural consumption and mobility demand. Urban demand also remained firm, with passenger vehicle sales maintaining high growth., it said.
Domestic air passenger traffic, however, declined further in July, partly reflecting capacity rationalisation by major aviation carriers and elevated aviation turbine fuel costs, RBI said.
Both merchandise exports and imports recorded a double-digit growth in July 2026 (y-o-y) with exports growing at a four-month high (in 2026-27 so far) driven by sectors like petroleum products, electronic goods, engineering goods, and organic and inorganic chemicals, the bulletin said.
However, exports of gems and jewellery, readymade garments of all textiles, and leather and leather products contracted. Destination-wise, export growth was broad-based with exports to the US expanding at double-digit rate after seven months, it said.
The growth in imports was driven by commodities such as electronic goods, petroleum, crude and products, and fertilisers.
Gold imports registered the lowest growth in 2026-27 so far, while silver imports contracted for the third consecutive month, likely reflecting the impact of import duty hike in May 2026.
India’s merchandise trade deficit widened both over the year as well as over the preceding month, driven by electronic goods, while oil deficit remained unchanged, RBI said.
The US Section 301 tariffs that imposed an additional 10 per cent tariff on India came into effect on 24 July 2026.
However, India’s major export commodities to the US, such as smartphones, petroleum products and pharmaceuticals, remain outside its purview. India is likely to be less affected than some of the Asian economies in the US market, such as China, Vietnam and Thailand, the bulletin said.
Net services exports grew at a healthy pace in June 2026, although imports grew at a faster pace than exports. The growth in services exports in June 2026 was primarily driven by software and business services, while transport, business, and travel services supported the growth in services imports, it added.
Quarterly results of listed non-government nonfinancial (NGNF) companies  for Q1:2026-27 indicate a resilient corporate performance with a sharp rise in nominal sales growth, mainly driven by automobiles, petroleum, and electrical machinery industries, RBI said.
Within services sector, sales growth of both IT and non-IT companies remained buoyant with a notable pick-up in the IT sector, it said.
The operating profit of manufacturing and services companies improved significantly during Q1:2026-27 from the previous quarter . The operating profit margins improved across all major sector, RBI said.
During Q1:2026-27, the revenue growth of listed banking and financial sector companies edged up. Net profit growth of these companies also surged, largely reflecting a decline in other provisions and contingencies, it said.
