Andalib Akhter / New Delhi
India’s economy continues to demonstrate resilience in the face of global uncertainty, according to the Finance Ministry’s Monthly Economic Review for May 2025, released on Friday. The review notes that high-frequency indicators (HFIs) for April and May suggest a positive economic trajectory has carried into FY26, supported by strong domestic demand, moderating inflation, and a stable employment environment.
Key HFIs like e-way bill generation, fuel consumption, and PMI indices point to sustained economic activity. While rural demand has received a boost from a healthy rabi harvest and favorable monsoon outlook, urban consumption is benefitting from higher leisure and business travel, as reflected in rising air passenger numbers and hotel occupancy rates.
Although there are signs of softening in select sectors like construction materials and vehicle sales, overall sentiment remains optimistic. Retail and food price inflation showed a broad-based decline in May 2025, thanks to solid agricultural output and timely government policy interventions.
Externally, India’s exports (goods and services) grew 2.8% year-on-year in May, showcasing resilience despite tariff-related uncertainties and weak global growth. Foreign exchange reserves stood at a strong $699 billion as of June 13, offering 11.5 months of import cover. The Indian rupee remained relatively stable, even as other currencies witnessed greater volatility.
Financial markets experienced some turbulence earlier in 2025 due to global trade tensions, but stabilized later with the announcement of a record surplus dividend by the RBI and better-than-expected Q4 FY25 GDP growth. As a result, the risk premium on Indian government bonds declined to 182 basis points by the end of May.
The labour market also showed signs of strength. Hiring increased across sectors such as AI/ML, Insurance, Real Estate, BPO/ITES, and Hospitality. Employment indicators within PMI surveys remained strong, while net payroll additions under EPFO indicated rising formal job creation.
The report concludes that India’s steady economic momentum through FY25 and into the early months of FY26 underscores the resilience of domestic growth engines. Private consumption, a resilient services sector, and strong employment generation remain central to sustaining India’s growth path amid a complex global backdrop.
