Domestic economy shows resilience in April amid global uncertainty: RBI Bulletin

India's domestic economic activity "exhibited resilience in April," even as the global economy remained "shadowed by uncertainties in West Asia," according to the Reserve Bank of India's May 2026 Bulletin.

India's domestic economic activity "exhibited resilience in April," even as the global economy remained "shadowed by uncertainties in West Asia," according to the Reserve Bank of India's May 2026 Bulletin. "The global economic activity in April continued to be shadowed by uncertainties in West Asia and disruption of energy supplies and trade flows," the article on State of the Economy noted. These concerns "resulted in heightened volatility in the various segments of the financial markets." While global activity showed "modest improvement over March," the "pace of expansion remained subdued amidst rising input costs, supply chain bottlenecks and weak business sentiment."

On the domestic front, "CPI inflation rose to 3.5 per cent in April, driven mainly by food inflation, while core inflation remained steady." Core inflation, which excludes food and fuel, "remained steady indicating limited pass-through of higher input cost conditions." Agriculture provided support to growth. "In agriculture, summer sowing progressed well, supported by above normal pre-monsoon rainfall and comfortable reservoir levels." The Bulletin added that "the current public foodgrain stocks remain well above the buffer norms ensuring domestic food security," though it cautioned that "a higher probability of above-normal minimum temperatures and unseasonal rains in some parts of the country could pose risks to the harvesting of remaining rabi crops."

"Domestic economic activity in April showed resilience notwithstanding deceleration in some of the indicators. Industrial and services activity stayed strong in many segments," the article said. Early Q4:2025-26 results of listed private non-financial companies "also showed an improvement in business performance over the previous quarter, with aggregate sales and operating profit recording a double-digit growth." High-frequency indicators were mixed but largely supportive. "E-way bills continued to achieve double-digit growth backed by GST rate rationalisation." While "overall petroleum consumption declined in April due to a sharp fall in the consumption of naphtha, liquified petroleum gas and other petroleum products," petrol and diesel consumption continued to grow. "Higher temperatures led to a sharp increase in electricity demand."

"The merchandise trade deficit widened in April 2026 over March 2026 with rising import bill primarily on account of crude oil and gold imports." On a year-on-year basis, the deficit "increased albeit marginally vis-a-vis April 2025, mainly due to rise in imports of electronic goods, gold and machinery." The surge in precious metals imports "prompted the Government to raise custom duties on gold, silver, and platinum." On capital flows, "net foreign direct investment remained positive for the second consecutive month" in March. "Foreign portfolio investors continued to remain net sellers in April and May, though the pace of outflows moderated."

Labour market conditions "witnessed some moderation in Q4:2025-26," with the labour force participation rate and worker population ratio declining and unemployment edging up, largely in rural areas. However, "in April, the all-India unemployment rate... witnessed an increase driven by rural areas, while the urban unemployment rate declined." PMI employment for manufacturing and services "rose to a ten-month high in April driven by new business orders." System liquidity "moderated slightly in May after easing in April on account of a pickup in government spending," while the weighted average call rate "generally remained below the policy repo rate during April and May."

Overall, the Bulletin concluded that India's economy maintained strength across key sectors even as "global uncertainty remained elevated" and commodity markets faced strain from West Asia tensions. (ANI)