Finance Ministry Paints Optimistic FY26 Outlook Despite Global Headwinds

The Monthly Economic Review For June 2025 from FinMin said that India's financial markets have demonstrated notable resilience, primarily driven by strong domestic investor participation.

India's economic activity in Q1 FY26 was underpinned by strong domestic demand, robust services growth, and encouraging signs from manufacturing and agriculture.

Source : ABPLIVE AI

The first quarter of FY26 presents a picture of resilient domestic supply and demand fundamentals and with inflation remaining within the target range and monsoon progress on track, the domestic economy enters the second quarter of FY26 on a relatively firm footing, Finance Ministry’s ‘Monthly Economic Review for June 2025’ said on Monday, adding that the economy has the look and feel of "steady as she goes" as far as the current fiscal (FY26) is concerned.

India’s macroeconomic fundamentals have remained resilient. Aided by robust domestic demand, fiscal prudence and monetary support, India appears poised to continue as one of the fastest-growing major economies, "with various forecasters, including S&P, ICRA, and the RBI's Survey of Professional Forecasters, projecting GDP growth rates for FY26 in the range of 6.2 per cent and 6.5 per cent", the monthly document emphasised.

India's financial markets have demonstrated notable resilience, primarily driven by strong domestic investor participation. This resilience is further underpinned by the robust health of the banking sector, as banks have strengthened their capital and liquidity buffers while improving their asset quality.

"Reflecting these improvements, the GNPA ratio and the NNPA ratio of the scheduled commercial banks are at a multi-decade low of 2.3 per cent and 0.5 per cent, respectively, complemented with strong earnings," the report said.

India's economic activity in Q1 FY26 was underpinned by strong domestic demand, robust services growth, and encouraging signs from manufacturing and agriculture.

Agricultural activity received a significant lift from a favourable southwest monsoon, which arrived early and has so far delivered above-normal rainfall. Fertiliser availability and reservoir levels are more than adequate, suggesting a strong outlook for the kharif sowing and harvest and consequent rural income and demand.

"The agriculture sector’s steady performance continues to serve as a stabilising pillar for the broader economy and bolsters the rural outlook. According to NABARD's rural sentiment survey, over 74.7 per cent of rural households expect income growth in the coming year, the highest since the survey’s inception," the Economic Review noted.

It further stated that the Indian economy in mid-2025 presents a picture of cautious optimism.

While geopolitical tensions have not elevated further, the global slowdown, particularly in the US (which shrank by 0.5 per cent in Q1 2025), could dampen further demand for Indian exports. Continued uncertainty on the US tariff front may weigh on India’s trade performance in the coming quarters. Slow credit growth and private investment appetite may restrict acceleration in economic momentum, the report highlighted.

"In the medium term, given the ongoing momentous shifts in global supply chains in the areas of semiconductor chips, rare earths and magnets, India has its task cut out," it added.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)