New Delhi– India’s economy has maintained its momentum in the early months of the 2025–26 fiscal year, showing resilience despite global uncertainties, according to the Finance Ministry’s Monthly Economic Review for May 2025, released on Friday. The report highlights that high-frequency indicators such as e-way bill generation, fuel consumption, and PMI indices point to continued economic strength driven by robust domestic demand, easing inflation, and a steady employment environment.
Rural consumption has picked up pace, supported by a strong rabi harvest and favorable monsoon projections, while urban demand remains buoyant, bolstered by increased leisure and business travel, as reflected in rising air passenger traffic and hotel occupancy. However, the report noted some signs of softening in specific areas like construction inputs and vehicle sales. Retail and food inflation continued to decline in May, helped by strong agricultural output and effective government measures.
While domestic economic indicators have been broadly positive, financial markets saw periods of volatility due to global developments, including heightened trade tensions in early 2025 followed by partial de-escalation later in the quarter. Despite this, the Indian government bond market remained stable in May, supported by a record surplus dividend announced by the Reserve Bank of India and strong GDP growth in the fourth quarter of FY25. This helped lower the risk premium on government bonds to 182 basis points as of May 30.
India’s overall exports of goods and services grew 2.8 percent year-over-year in May 2025, underscoring the resilience of the external sector amid global headwinds. As of June 13, the country’s foreign exchange reserves stood at $699 billion, providing an import cover of 11.5 months. The Indian rupee remained relatively stable, especially compared to the more pronounced fluctuations seen in other currencies.
Labor market indicators reflected continued stability. White-collar hiring increased in sectors such as AI/ML, insurance, real estate, BPO/ITES, and hospitality. Employment sub-indices in the PMI surveys also reached highs, while net payroll additions under the Employees’ Provident Fund Organisation pointed to steady growth in formal employment.
The review concluded that the strong performance in FY25 was driven by resilient private consumption and a robust services sector, and that positive momentum appears to be carrying forward into FY26, as evidenced by the strength of high-frequency indicators. (Source: IANS)
