NEW DELHI: The ongoing West Asia conflict poses significant supply- and demand-side risks to India’s economy. However, high-frequency indicators through April and early May 2026 suggest that domestic demand and economic activity have remained resilient despite emerging signs of stress, Chief Economic Adviser V. Anantha Nageswaran said on Friday.
Manufacturing activity, capital formation, services, exports and automobile sales have continued to record healthy growth, reflecting the strength of the economy’s underlying fundamentals built through years of infrastructure investment and structural reforms, he said.
“We have to wait and see how oil prices evolve. There is also monsoon-related uncertainty that we must keep in mind, not only in terms of inflation but also in terms of what it means for disposable income and private final consumption expenditure going forward,” Nageswaran said.
His remarks came on a day when the Reserve Bank of India revised its FY27 GDP growth forecast downward to 6.6% from 6.9% while raising its CPI inflation projection to 5.1% from the earlier estimate of 4.6%.
Nageswaran described the central bank’s assessment as fair given the prevailing uncertainties.
“Supply-side price pressures are beginning to emerge in wholesale inflation. In addition, the IMD’s forecast of monsoon rainfall at 90% of the long-period average poses upside risks to the inflation outlook,” he said.
At the same time, Nageswaran noted that the nominal GDP growth assumption of 10.1% for FY27 could eventually turn out to be significantly higher if inflation remains elevated. He also expressed confidence that real GDP growth could exceed 7% in FY28.
Higher inflation, analysts said, could partly cushion the government’s fiscal position by helping offset additional spending required to absorb the impact of rising fertiliser and fuel costs.
India’s economy grew by 7.8% in the fourth quarter of FY26, lifting full-year growth to 7.7%, higher than the earlier estimate of 7.6%.
Commenting on the tax exemption provided to foreign investors in government securities and recent measures to boost foreign exchange inflows, Nageswaran said the steps aimed at managing potential pressures on the current account deficit amid uncertainty surrounding global crude oil prices.
While acknowledging risks stemming from energy prices, monsoon performance and global supply disruptions, he said India’s export resilience had emerged as a positive surprise. Core merchandise exports and services exports have remained robust despite disruptions in global trade flows.
According to him, recent policy measures will help contain supply-side disruptions, provide safety nets through initiatives such as ECLGS 5.0, and preserve macroeconomic stability.
Improved policy certainty arising from trade agreements and ongoing negotiations, including progress on India-US and India-EU trade deals, is expected to support exports and capital inflows, although global uncertainty continues to weigh on investment flows.
Nageswaran added that the continued pursuit of structural reforms during this period of global uncertainty would further strengthen India’s economic foundations and position the country for sustained high growth in the years ahead.
Source; The Financial Express
