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".
