RBI officials noted that despite a pick-up in May, CPI-inflation remained anchored.
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Any breakdown of the interim US-Iran peace agreement may reignite material risks in terms of inflationary expectations, disrupted critical energy infrastructure, delayed investment spending, food security concerns, adverse financial stability outlook and structurally lower growth, cautioned RBI officials in the central bank’s monthly bulletin. The uncertainties could have an impact on the outlook through international trade, cost pressures, capital flows and commodity prices, they said.They noted that the global economic landscape remains fragile despite some respite gained through the interim US-Iran peace agreement.“The Indian economy entered this turbulence with much better fundamentals relative to many other countries to sustain the shock.“India maintained a consistently high growth, anchored inflation expectations, sustained fiscal consolidation, manageable current account balance and foreign exchange buffers over the previous few years, which adds to its strength vis-à-vis similar other events in the past,” the officials said in the article ‘State of the Economy’ published in the bulletin.They cautioned that an adverse south-west monsoon, if materialised, may weigh on the domestic growth-inflation outlook.economic momentumThe authors observed that high-frequency indicators during the first two months suggest sustained economic momentum in 2026-27.“Domestic demand conditions remained resilient, supported by urban demand...Record buffer stocks of rice and wheat are likely to provide cushion against any adverse impact of El Niño,” they said.In May, the all-India unemployment rate measured by current weekly status, witnessed an increase driven by rural areas, while the urban unemployment rate declined, per the bulletin.The demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) continued to decline for the eleventh consecutive month.The Indian economy displayed strength in terms of the provisional GDP estimates (7.7 per cent) for 2025-26. GDP growth during Q4:2025-26 remained robust at 7.8 per cent, driven by private consumption and fixed investment, according to the bulletin.on InflationRBI officials noted that despite a pick-up in May, CPI-inflation remained anchored.CPI headline inflation inched up sequentially to 3.9 per cent (y-o-y) in May 2026 from 3.5 per cent in the preceding month driven by broad-based increases in all the three categories - food & beverages, fuel and core components.Published on June 22, 2026
