Whereas India’s macroeconomic well being is in a “relative goldilocks state of affairs”, the prevailing world uncertainty means these could also be “nervous however thrilling occasions” for the financial system, the Ministry of Finance mentioned on Friday.
“The temporary Israel-Iran warfare, adopted by the US intervention, pushed the value of crude oil sharply greater. Its persistence would have threatened India’s progress and monetary outlook within the present monetary 12 months. Fortunately, there’s a ceasefire, and oil costs have retreated sharply. There’s an ample world provide of oil, however insurance coverage prices and the perceived danger of potential closure of choke factors would possibly trigger the landed worth to rise,” the ministry mentioned in its month-to-month financial evaluation report for Could.
“Therein lies the chance to India. For now, the chance has receded. However it’s too quickly to sound the ‘all clear’ for the remainder of the 12 months. However, then, we now have to get used to doing the balancing act or the high-wire act for a while to come back,” it added.
World crude oil costs shot up after Israel attacked Iran on June 13, with the US becoming a member of in every week later and hitting three Iranian nuclear websites. Nonetheless, tensions eased quickly as considerations over Iran blocking the important thing Strait of Hormuz proved unfounded and US President Donald Trump introduced a ceasefire on June 24, main to grease costs cooling and falling beneath $70 per barrel.
Economic system resilient
Commenting on the Indian financial system after the Gross Home Product (GDP) grew by a higher-than-expected 7.4 per cent in January-March 2025, the Finance Ministry’s report mentioned high-frequency information indicated that the efficiency within the first two months of the present fiscal had been “resilient” amid “heightened geopolitical state of affairs”.
“E-way invoice technology continues to climb, reaching a second all-time excessive stage in Could 2025, to 122.7 million. On a YoY (year-on-year) foundation, it continues to increase in double digits, signalling strong enterprise exercise. Moreover, diesel and petrol consumption reached record-high ranges in Could 2025. This improve might primarily be attributed to elevated leisure journey throughout the summer season season, enhanced industrial actions boosting transport operations, and intensified agricultural irrigation efforts,” ministry mentioned. Nonetheless, it famous that commerce coverage uncertainty had elevated “considerably” in current months, regardless that India’s merchandise and companies exports in Could elevated by 2.8 per cent in comparison with a 12 months in the past, which the ministry mentioned “underscores the resilience of our exports within the face of tariff uncertainties and subdued world financial circumstances”.
On the value entrance, inflation measured by the Client Value Index (CPI) fell to a 75-month low of two.82 per cent in Could, with the Reserve Financial institution of India’s (RBI) Financial Coverage Committee reducing the repo fee by one other 50 foundation factors (bps) earlier this month on June 6 to five.5 per cent, taking the whole quantum of its fee cuts in 2025 to 100 bps. On the similar time, the RBI introduced a 100 bps discount within the banks’ Money Reserve Ratio that can come into impact later this 12 months. In response to the Finance Ministry, the MPC’s “decisive actions…goal to ease funding prices, launch loanable funds for the banking sector and thus assist credit score progress”.
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Optimistic jobs outlooks
Whereas the unemployment fee rose to five.6 per cent in Could from 5.1 per cent in April as per the statistics ministry’s Periodic Labour Pressure Survey – primarily on account of seasonal elements – the Finance Ministry mentioned the outlook for the roles market was optimistic.
“Going ahead, the outlook for hiring and employment seems regular. The TeamLease Employment Outlook Report has estimated a web employment progress of two.8 per cent in H1 (April-September) of FY26. The report states that 47 per cent of employers intend to increase their workforce in H1 FY26, indicating sustained expertise acquisition momentum. The report additionally emphasises a shift in hiring from amount growth to high quality growth with emphasis on talent density, retention over alternative, and AI-driven productiveness,” the Ministry mentioned.
