NEW DELHI, JUL 29 (PTI): India will have to re-invent itself and re-imagine its responses to evolving global challenges, especially high energy prices, to achieve strategic leverage, with domestic reforms and swift policy action being crucial to reshape the country’s economic trajectory, a Finance Ministry report said on Wednesday.
While flagging upside risks to inflation, fiscal and current account deficits and downside risk to growth in the wake of persistent stand-off in the Gulf region, the Ministry’s monthly report said swifter policy responses and their implementation are vital to encourage foreign and domestic investment in the country’s economy.
“Global developments related to AI and weaponisation of supply chains in general are reminders of the distance India needs to travel to achieve long-term resilience and strategic leverage. Recent years have been a time for hunkering down and battening down the hatches. Coming years will be no exception,” said the Monthly Economic Review report for July. “… the recent resurgence in global crude oil prices, if sustained, could re-emerge as a source of pressure on financing of both the fiscal deficit and the current account balance,” the report said.
It said global economic uncertainty has resurfaced during the month as geopolitical tensions in West Asia escalated, leading to renewed upward pressure on crude oil prices after a brief period of easing. Although the increase remains well below the sharp spike witnessed during the initial phase of the West Asia conflict, uncertainty surrounding the global outlook has increased, it said. Brent futures rose over 5 per cent to USD 88.40 a barrel on Wednesday after the US and Saudi Arabia launched targeted strikes on Iraq.
Since the beginning of the war in West Asia on February 28, crude oil prices have risen significantly, stoking inflation fears. Crude prices soared to a four-year high of USD 126 per barrel in early May from about USD 73 level before the war.
The ministry’s report said that Indian economy has continued to demonstrate resilience amid a challenging global backdrop. Nonetheless, global challenges show no sign of letting up, with uncertainties mounting. “So, India has to reinvent itself and re-imagine its responses to global imperatives if it has to achieve strategic leverage. As external conditions evolve, the continued interplay of domestic reforms, prudent macroeconomic management and swift policy responses, backed by consistent on-ground implementation will remain important in shaping India’s economic trajectory,” the report noted.
While global crude price fluctuations from geopolitical events and potential El Nino weather patterns are being carefully monitored, the domestic inflation outlook remains cautious and structurally well-supported, anchored by active measures to support price stability, robust agricultural commodity procurement and targeted contingency plans in place.
The report said despite heightened global uncertainties, India’s economic outlook remains underpinned by resilient domestic fundamentals, continued policy support, and strengthening structural drivers of growth.
Structural reforms of the last decade and infrastructure investments are contributing to growth resilience as is evident in the data for the months of March to June 2026, it said.
The report said India’s external sector exhibits notable resilience with strong export performance, a services trade surplus, and consistent remittance flows that have strengthened the current account.
Furthermore, recent policy measures will provide an impetus to capital inflows in the near term. Together with adequate foreign exchange reserves, these factors are expected to reinforce the external sector’s resilience, it added.
