India - Economic Resilience Amid Global Uncertainty

 

Economic Resilience Amid Global Uncertainty

Insights from the Monthly Economic Review (February 2026)

The Ministry of Finance, Government of India, has released the Monthly Economic Review for February 2026, outlining a robust macroeconomic trajectory for the country. Despite an increasingly complex global environment, the report highlights that India’s economic framework remains anchored in stability, resilience, and inclusive growth.

Sustained Growth Momentum

The Indian economy has demonstrated strong performance, with real GDP growth estimated at 7.6 per cent in FY26. This growth has been broad-based, with industry and services acting as primary drivers. High-frequency indicators from January 2026, including strong manufacturing order books and robust services activity, suggest that this growth momentum is expected to persist into the next fiscal year.

A New Statistical Framework

A significant highlight of the period is the introduction of a revised GDP series with 2022-23 as the base year, alongside a new CPI series (base 2024). These updates enhance the accuracy and granularity of economic measurement by better capturing formalisation, digitalisation, and emerging service sector activities. Under the new CPI series, inflation for January 2026 was measured at a moderate 2.75 per cent, reflecting a normalisation in food prices.

Fiscal Prudence and Budgetary Direction

Fiscal policy continues to follow a consolidation path, with the government balancing deficit reduction while maintaining a strong emphasis on capital expenditure (Capex). Capex grew by 11.2 per cent during April-January FY26, supporting infrastructure-led growth. The Union Budget 2026-27 further advances this by setting a target of 4.3 per cent for the fiscal deficit in FY27, signalling continued commitment to macroeconomic stability.

Trade, Finance, and Employment

While global trade policy uncertainty remains elevated, India has seen strong growth in services exports, which reached their highest-ever monthly level in January. Foreign exchange reserves remain comfortable, providing more than 11 months of import cover. Furthermore, the financial sector is showing healthy credit growth, particularly in services and micro and small enterprises.

The labour market also shows signs of strengthening, with employment increasing and rising female participation. The government’s employment strategy, centred on "Yuva Shakti," focuses on integrating job creation, skill development, and investments in education and healthcare.

Navigating Geopolitical Risks

The report acknowledges significant challenges, including recent geopolitical tensions in the Gulf region that have disrupted oil supplies and impacted global energy markets. While these factors introduce uncertainty, India enters the new financial year with a solid macroeconomic backdrop. The Ministry emphasises that the country’s shock-absorbing capacity, combined with proactive governance, will be vital in navigating these external challenges while continuing to pursue the vision of a "Viksit Bharat".