Indian economy navigated well external uncertainties: RBI Bulletin

Indian economy has navigated well the external uncertainties and supply chain pressures, underpinned by healthy demand conditions and resilient performance of the industrial and services sectors, according to a Reserve Bank of India (RBI) bulletin.

“The global economy is dealing with uncertain economic environment, supply chain disruptions and fragmented trading relationships. Amidst these uncertainties, India remains among the fastest growing major economies across the globe and has been able to sustain the momentum in economic activities through June,” senior officials said in RBI Bulletin July edition, which was released on Wednesday.

Highlighting that both industrial and services sector indicators remained firm; they however said the farm sector is witnessing “uneven” southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks,.

Reflecting strong economic activity and aggregate demand in June, they said Goods and Services Tax (GST) revenue growth picked up during the month, driven largely by a sharp increase in tax revenues. Dmestic demand was supported by a sharp pick-up in rural demand in June, they added.

“The momentum of external trade sustained as reflected in high growth in exports and imports in Q1:2026-27. This is likely to be strengthened by the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement and progress in other bilateral trade agreements,” they emphasised..

The external vulnerability indicators remained sound; they said, adding recovery of foreign investments in recent months shows a revival of confidence in the economy. “India’s external sector remains steady with improving outlook, aided by inflows of foreign investments,” they added.

Inflation

Finding that headline retail inflation inched up in June, while core inflation, especially excluding precious metals, remained low; it said liquidity conditions however improved further, supporting the ongoing credit growth. 

The headline Consumer Price Index (CPI) inflation crossed the target for the first time since January 2025, increasing to an 18-month high of 4.4% in June 2026 from 3.9% in May, the officials said, adding the pick-up in inflation was driven by ‘food and beverages’ and ‘fuel’ components, while core inflation stood unchanged.

The increase in ‘food and beverages’ inflation remained broad-based driven by meat, edible oils, fruits and spices. On a month-on-month (MoM) basis also, all the sub-components of ‘food and beverages’ in the CPI basket edged up in June.

Fuel inflation spiked in June, driven by increase in retail prices of petrol, diesel and liquefied petroleum gas (LPG),” they said.

Nevertheless, core inflation remained stable at 3.9% year-on-year (YoY) in June 2026, amidst decline in ‘personal care, social protection and miscellaneous goods and services’; partially offset by rise in ‘restaurant and accommodation services’.

Inflation edged up both in urban and rural areas and most of the states/UTs recorded inflation in the range of 2-6%, according to them.