It is simply too soon to sound the ‘all clear’ on the risk of rising oil costs, although the risk from the Israel-Iran battle has receded following the ceasefire between the two international locations, the Ministry of Finance stated in a report.
According to the Monthly Economic Report (MER) for May 2025 launched by the Department of Economic Affairs on Friday (June 27, 2025), the Israel-Iran struggle might have threatened India’s development and financial outlook for the present monetary 12 months 2025-26.
However, the two international locations agreed to a ceasefire earlier this month and oil costs have since fallen by about 6-7%.
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“There is an ample global supply of oil, but insurance costs and the perceived risk of potential closure of choke points might cause the landed price to rise,” the report warned. “Therein lies the risk to India. For now, the risk has receded.”
“But, it is too soon to sound the “all clear” for the relaxation of the 12 months,” it added. “But, then, we have to get used to doing the balancing act or the high-wire act for some time to come. In this, India is on a better footing than many other nations.”
The Department of Economic Affairs report stated that the Indian economic system could expertise “nervous but exciting times” in the days forward.
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Overall, the report famous that with no main elements main to an imbalance in the nation’s macroeconomic aggregates, a subdued inflation charge and a “growth-supportive monetary policy stance”, India’s macroeconomic well being is in a “relative goldilocks situation”.
While highlighting the 6.5% development actual GDP development estimate 2024-25, the report stated that the first two months of 2025-26 additionally level to resilience in financial exercise.
“High-frequency indicators such as e-way bill generation, fuel consumption, and PMI indices point to continued resilience,” the report stated. “Rural demand has strengthened further, supported by a healthy rabi harvest and a positive monsoon outlook.”
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Urban consumption, it added, was being bolstered by elevated leisure and enterprise journey, as seen from the rise in air passenger visitors and resort occupancy.
However, it additionally identified that there are indicators of softening of demand in areas like building inputs and automobile gross sales.
