Too quickly to sound the all clear on the danger of rising oil costs: Finance Ministry 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 may have threatened India’s development and monetary outlook for the present monetary 12 months 2025-26.

However, the 2 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 world provide of oil, however insurance coverage prices and the perceived danger of potential closure of choke factors would possibly trigger the landed value to rise,” the report warned. “Therein lies the danger to India. For now, the danger has receded.”

“But, it’s too quickly to sound the “all clear” for the remainder of the 12 months,” it added. “But, then, we have now to get used to doing the balancing act or the high-wire act for a while to return. In this, India is on a greater footing than many different nations.”

The Department of Economic Affairs report stated that the Indian financial system might expertise “nervous however thrilling occasions” within the days forward.

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Overall, the report famous that with no main elements resulting in an imbalance within the nation’s macroeconomic aggregates, a subdued inflation price and a “growth-supportive financial coverage stance”, India’s macroeconomic well being is in a “relative goldilocks scenario”.

While highlighting the 6.5% development actual GDP development estimate 2024-25, the report stated that the primary two months of 2025-26 additionally level to resilience in financial exercise.

“High-frequency indicators akin to e-way invoice era, gas consumption, and PMI indices level to continued resilience,” the report stated. “Rural demand has strengthened additional, supported by a wholesome rabi harvest and a constructive 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 development inputs and car gross sales.