FinMin Says India Is on Stable Footing and Well Positioned to Tackle Emerging Risks

FinMin Says India’s Economy on Stable Footing, Well Placed to Navigate Global Risks

India’s economy is firmly positioned on a stable footing, supported by easing inflation, improving demand conditions, and resilient domestic macro indicators, according to the Finance Ministry’s Monthly Economic Review (MER) for October 2025. The report stated that the nation remains well placed to manage emerging global risks and sustain growth momentum through the rest of FY26.

The review highlighted that real GDP growth for Q2 FY26 is likely to be in the 7–7.5% range, reflecting strong underlying economic activity. Independent assessments have projected Q2 growth closer to 7.3%, while the Reserve Bank of India (RBI) estimates GDP expansion at 7%.

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Inflation Outlook Encouraging as Demand Strengthens

The MER noted that inflation expectations remain well anchored, aided by cooling global commodity prices and stable energy markets. Domestic supply-side interventions have further helped contain price pressures, particularly in food categories.

“The inflation outlook remains encouraging,” the report said, though it also emphasized the need for continued vigilance amid shifting global dynamics.

The ministry pointed out that sustained public capital expenditure, coupled with strengthening rural and urban demand, has significantly supported India’s economic resilience. Recovery in rural consumption has been aided by improved agricultural activity, with robust Rabi sowing and healthy reservoir levels boosting farm incomes and food supply stability.

Global Uncertainties Pose External Risks to Growth

Despite strong domestic fundamentals, the Finance Ministry flagged several global risks that could impact India’s growth trajectory. These include:

• Shifting global trade policies

• Heightened geopolitical tensions

• Financial market volatility affecting capital flows

Such developments could affect exports, investor sentiment, and foreign capital inflows, the report cautioned. However, India’s expanding services exports, which hit their highest-ever monthly level in October, continue to act as a critical stabilizer against merchandise trade volatility.

Trade Dynamics Mixed as Exports Soften, Services Surge

The MER highlighted that India’s merchandise exports softened in October, largely due to an unusual spike in gold and silver imports. At the same time, the services sector delivered record performance, offering a substantial cushion to the trade deficit.

On capital flows, the report revealed a mixed trend:

• FDI inflows remained strong, reinforcing long-term investor confidence

• Portfolio flows stayed subdued, reflecting global market choppiness

India’s foreign exchange reserves at $687 billion continue to serve as a powerful buffer against external shocks.

The ministry also noted that frontloading of trade orders in anticipation of higher tariffs boosted trade activity in 2025. However, the positive trend was partially offset by trade fragmentation and rerouting, causing actual effective tariff rates to lag behind published announcements.

Global Trade Growth Expected to Slow, Says IMF

According to the IMF’s World Economic Outlook (October 2025), global trade volume for goods and services is expected to grow at 3.6% in 2025, before slowing to 2.3% in 2026—significantly lower than the 3.5% expansion in 2024. This slowdown, the MER said, underscores the fragile nature of the global recovery and reinforces the need for India to remain cautious amid evolving external dynamics.

Corporate Sector Stable with Healthy Profitability

The report observed that Indian corporates continue to display healthy profitability and maintain strong balance sheets, supported by steady growth in demand and improved financial discipline. Domestic markets are drawing strength from robust institutional participation, further anchoring macro stability.

Labour Code Implementation Marks Historic Reform Push

A notable structural development highlighted in the MER was the government’s move to implement four major labour codes, replacing 29 earlier laws. The labour ministry notified the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020) on November 21.

According to the review, these reforms modernize India’s labour framework, strengthen worker welfare, and align regulations with the changing world of work. The ministry called this transformation a foundational step toward building a future-ready workforce and supporting the vision of Viksit Bharat 2047.

Economy Positioned for Steady Growth Momentum

Overall, the Finance Ministry’s Monthly Economic Review emphasized that India’s economy remains resilient, stable, and well-positioned to navigate global uncertainties. With inflation easing, demand recovering, services exports rising, and structural reforms advancing, the economy is likely to maintain its positive growth trajectory in FY26.

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