India achieved 7.8% growth in Q4 2025-26, supported by private consumption and fixed investment, according to reports from Business Standard. The government now expects a pick-up in the economy as the West Asia situation improves and oil prices fall, with economic indicators pointing to strong momentum in the first quarter. As per The Times of India, advance indicators such as GST collections, which rose 14% in June, factory output and PMI data pointing to expansion support this optimistic outlook.
Consumer price index (CPI) inflation increased to 3.9% in May 2026 from 3.5% in the previous month, driven by broad-based increases across food, fuel and core components, as reported by Business Standard. The Monetary Policy Committee unanimously decided to keep the policy repo rate unchanged at 5.25% in its bi-monthly review of June 2026, maintaining a neutral stance while waiting for clarity on West Asia conflict situation and risks from likely sub-normal south-west monsoon and El Ni event.
The provisional accounts of the Central Government for 2025-26 strengthened the credibility of the fiscal consolidation path, with the gross fiscal deficit at 4.4% of GDP, according to Business Standard. The merchandise trade deficit remained largely unchanged in May 2026 over the previous month but widened year-on-year mainly due to higher crude oil prices. Surplus liquidity in the banking system moderated in the second half of May and June, reflecting increased currency in circulation and elevated government cash balances.
The global macro-economic environment remained fragile with emerging economy equity markets facing increased volatility, while advanced economies like the US and Europe reflected improved confidence and falling risk premia, as reported by Business Standard. The interim peace deal in West Asia eased concerns over energy supply disruptions, with Brent crude oil prices sharply correcting to below US$80 after the peace deal announcement in the third week of June. The World Bank Commodity Price Index softened in May due to the oil price decline.
