India’s Economic Outlook Remains Positive Amid Global Headwinds: Finance Ministry

The Indian economy continues to exhibit strength and stability despite mounting global uncertainties, the Union Ministry of Finance stated in its Monthly Economic Review for May 2025.

The review, released by the Department of Economic Affairs, highlighted that the outlook remains positive, supported by factors such as easing inflation, steady employment, and a robust external sector.

“Overall, the outlook for the Indian economy remains positive, demonstrating resilience amid a turbulent global environment,” the ministry said, attributing the stability to strong domestic demand and effective policy interventions.

According to the review, India’s economic momentum has been sustained through the first two months of FY26.

High-frequency indicators (HFIs) such as e-way-bill generation, fuel consumption, and Purchasing Managers’ Index (PMI) readings indicate continued activity across sectors.

Real GDP grew by 6.5% in FY25, aligning with the Second Advance Estimates.

This expansion occurred despite a difficult global backdrop marked by geopolitical tensions and trade disruptions.

The services sector remained the key driver on the supply side, while growth in construction, steady manufacturing, and a rebound in agriculture further strengthened the economy.

Domestic drivers of growth

The ministry pointed to a rebound in rural consumption, steady investment flows, and a positive trade balance as key contributors to the nation’s resilience.

Urban consumption also showed strength, aided by an increase in business and leisure travel, as reflected in growing air-passenger traffic and hotel occupancy.

Meanwhile, the agriculture sector benefited from a strong rabi harvest and favourable monsoon projections.

Industrial growth, particularly in construction, added further momentum.

Retail and food-price inflation saw a broad-based decline in May 2025, driven by record food-grain output and targeted government measures.

However, the review acknowledged that financial market volatility is influenced by international developments.

The ministry noted that trade tensions in early 2025, followed by partial easing in the second quarter, had caused instability in financial markets.

Nevertheless, domestic indicators remained largely positive.

While domestic conditions are encouraging, the report warned that persistent global challenges—such as trade frictions, policy uncertainty, and geopolitical conflicts—could still affect India’s growth prospects.

“These external challenges could potentially impact India’s growth trajectory and warrant close and continuous monitoring,” the report concluded, stressing the importance of vigilance as the global economic climate evolves.

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