NEW DELHI, April 29 (Reuters) - India's economy remains resilient but faces mounting risks from the Middle East conflict, which has disrupted supplies of energy, fertilisers and industrial raw materials, raised costs and weakened trade, the government's monthly economic report said on Wednesday.
"India enters FY2026-27 at the intersection of domestic resilience and external turbulence," the report said, adding that the West Asia war has altered the macroeconomic outlook following real GDP growth of 7.6% in the previous fiscal year.
The government said India remained a relative bright spot, with the International Monetary Fund raising its 2026-27 growth forecast for the country to 6.5% from 6.4%.
However, it warned that risks were tilted toward higher inflation, wider fiscal and external deficits and slower growth, especially if energy and fertiliser supply disruptions persist.
The report said India's crude oil basket averaged $113 per barrel in March and was just under $115 per barrel this month through April 24. It added higher wholesale prices showed that cost pressures were building, even though consumer inflation remained moderate.
Retail inflation rose to 3.4% in March from 3.2% in February, while food inflation increased to 3.87%. Wholesale inflation accelerated to 3.88% in March from 2.13% in February, reflecting rapid transmission of higher energy and commodity prices at the producer level.
"The risks are tilted toward persistence rather than quick reversal of the price pressures," the report said.
Trade also weakened in March, with merchandise exports down 7.4% year-on-year and 24 of 30 major export categories declining. Exports to the United Arab Emirates and Saudi Arabia fell sharply as the Strait of Hormuz blockade raised freight, insurance and logistics costs.
The report said remittances, which reached a record $135.4 billion in FY25, could come under pressure if a prolonged conflict weakens Gulf labour markets.
India’s unemployment rate rose to 5.1% in March from 4.9% in February, though the report said labour conditions have broadly stabilised, while confidence in future job prospects has weakened, particularly in urban India.
Reporting by Manoj Kumar and Sarita Chaganti Singh; Editing by Sonia Cheema
Source: Reuters