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Informist, Thursday, Oct. 1, 2026

 

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--Fin Min: India econ enters Q2 FY27 with a position of strength
--CONTEXT: Comments by finance ministry in Monthly Economic Review for Sept
--Fin min: Data shows continued econ activity in early part of Q2
--Fin min: Monsoon conditions more favourable than anticipated earlier
--Fin min: Rabi prospects need monitoring
--Fin min: External risks persist with renewed geopolitical tensions
--Fin min: External risks persist with rising weaponisation of supply chains
--Fin min:Sustaining growth needs preserving macro stability, econ resilience
--Fin min: Kharif crop sowing progress contingent on rainfall distribution
--Fin Min: India cannot afford to take its growth performance for granted
--Fin min: India facing upside inflation risks from geopolitics, climate
--Fin min: Strong El Nino can impact rabi crops
--Fin min:India facing upside inflation risks from monetary policy headwinds
--Fin min: Geopolitics, oil prices can add to imported inflation risks
--Fin min: Govt steps can help contain temporary price pressures
--Fin min: India econ continues to show resilience in challenging environment
--Fin min: Near-term uncertainties arising from tariff cast shadow on India
--Fin min: Near-term uncertainties in crude prices to cast shadow on India
--Fin min: Near-term uncertainties in supply chain to cast shadow on India
--Fin min: Near-term uncertainties to cast shadow on India as investment hub
--Fin min: India's growth potential will earn investors' attention over time
--Fin min: Improved governance at all levels key to competitive Indian econ 
--Fin min: India must work on making econ more competition-friendly

 

NEW DELHI – India is entering Jul-Sept with a position of strength but it cannot afford to take its growth performance for granted considering the geoeconomics and geopolitical uncertainties, the finance ministry said Thursday. India posted higher-than-expected GDP growth of 7.8% in the June quarter. 

 

The ministry in its Monthly Economic Review for September flagged the deteriorating circumstances across the globe and said, "Geopolitical polarisation may be worsening amidst apparent bonhomie. Supply-chain weaponisation is intensifying and global supply shocks in diverse sectors such as energy, metals, electronics, food and semiconductors are beginning to emerge." 

 

The statement comes amid the ongoing war in West Asia, which is now in its seventh month and has caused havoc in the global energy supply chain. The impact of the war in West Asia can be seen as inflation is arising due to supply chain disruption. This will also restrain economic growth, the ministry said. 

 

"...external risks persist, with renewed geopolitical tensions and the growing weaponisation of supply chains, keeping energy prices volatile, tightening global financial conditions, and disrupting trade routes. Sustaining growth will therefore require preserving macroeconomic stability and strengthening economic resilience," it said.

 

 

Most high-frequency indicators point to continued economic activity in the early part of Jul-Sept, the ministry said, adding that monsoon conditions have been more favourable than earlier anticipated, with kharif sowing close to last year's levels across several crops. This supports the outlook for agricultural output and rural demand, although rabi prospects will require monitoring, it said.

 

"Going forward, sustaining industrial momentum while increasing scale, domestic value addition, supply-chain depth and export competitiveness will remain important for broadening the manufacturing base," it said. Moreover, the progress of kharif crops will remain contingent on the spatial distribution of rainfall during the remaining monsoon period, it added.

 

The ministry flagged upside risks to inflation on the back of compounding climate, geopolitical, and monetary headwinds. "A strong El Nino event could pose risks to the upcoming Rabi crop through heat stress and reduced soil moisture, although a positive Indian Ocean Dipole may partially offset these effects," it said.

 

Geopolitical tensions and elevated crude oil prices could also add to imported inflation pressures, particularly after the US Federal Reserve's 25-basis-point rate hike last month, it added. India's retail inflation, based on the CPI, rose to a 20-month high in August due to higher food, transport, and restaurant services inflation driven by the impact of the ongoing war in West Asia.

 

In this context, the Reserve Bank of India's recent open market operations to absorb excess system rupee liquidity can help maintain balanced financial conditions and contain any undue demand-side overheating, it added. The RBI sold gilts worth INR 1 trillion through open market operations in the second half of September, its first auctions to sell bonds in five years. The central bank likely drained durable liquidity as its special schemes to attract foreign capital were more successful than anticipated, leading to a glut of rupee liquidity domestically. The schemes drew $144 billion of inflows between Jun. 8 and Sept. 18. Durable liquidity rose to a record high of INR 13.94 trillion as of Sept. 15.

 

Meanwhile, in the near term, festival demand and higher input costs could exert some pressure on prices, it said, adding that proactive supply-side and market measures by the government could help contain these upside risks and provide a cushion against temporary price pressures. 

 

While the Indian economy continues to display resilience in a challenging global environment, investor interest in India is "cautious" not low, the ministry said. "Near-term uncertainties pertaining to the state of the trade relationship with the US, tariff pressures, uncertainty with respect to crude oil prices and supply and the absence of an India-angle to the AI-related global developments cast a shadow on India as an attractive investment destination," it flagged. Over time, as some of these clouds inevitably dissipate, India's intrinsic growth potential will earn the attention it deserves from investors, it said.

 

The ministry also flagged that rising interest rates in developed economies will spill over into domestic bond yields and limit crossborder capital flows into India, amid pervasive and rising global uncertainty. It, thus, called for India to work on ensuring that the economy is more competition-friendly rather than business-friendly, it said.

 

"Only a competitive economy will become a successful, innovative, and manufacturing economy," it added. "Improved governance and enhanced state capacity at all levels of the government hold the key to a competitive Indian economy." End

 

Reported by Pratiksha and Shweta

Edited by Akul Nishant Akhoury

 

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