RBI Says India’s Economy Remained Resilient in April Despite Global Uncertainty

India’s domestic economy remained resilient in April despite rising geopolitical tensions and volatility in global markets, according to the May 2026 Bulletin released by the Reserve Bank of India.

The central bank noted that the global economy continued to face uncertainty due to tensions in West Asia, disruptions in energy supplies and slowing trade flows, all of which affected financial markets and business sentiment worldwide.

“The global economic activity in April continued to be shadowed by uncertainties in West Asia and disruption of energy supplies and trade flows,” the RBI’s article on the “State of the Economy” said.

According to the Bulletin, these disruptions “resulted in heightened volatility in the various segments of the financial markets.”

Although global activity improved slightly compared to March, the RBI said “the pace of expansion remained subdued amidst rising input costs, supply chain bottlenecks and weak business sentiment.”

Despite this challenging environment, India’s domestic economy showed signs of strength across agriculture, industry and services.

“Domestic economic activity in April showed resilience notwithstanding deceleration in some of the indicators. Industrial and services activity stayed strong in many segments,” the article said.

The RBI also pointed to improving corporate earnings. Early fourth-quarter results for listed private non-financial companies “showed an improvement in business performance over the previous quarter, with aggregate sales and operating profit recording a double-digit growth.”

What did the RBI say about inflation and food prices?

Inflationary pressures remained moderate overall, although food prices pushed headline inflation slightly higher during the month.

“CPI inflation rose to 3.5 per cent in April, driven mainly by food inflation, while core inflation remained steady,” the Bulletin said.

Core inflation, which excludes volatile food and fuel prices, “remained steady indicating limited pass-through of higher input cost conditions.”

The RBI’s assessment suggests that while global supply disruptions and rising commodity prices are creating inflationary pressures internationally, their broader impact on India’s domestic prices remains contained for now.

The report also highlighted agriculture as an important support for economic stability.

“In agriculture, summer sowing progressed well, supported by above normal pre-monsoon rainfall and comfortable reservoir levels,” the Bulletin noted.

The RBI added that foodgrain availability remains strong.

“The current public foodgrain stocks remain well above the buffer norms ensuring domestic food security,” it said.

However, the central bank warned that weather conditions could still create risks for agricultural production.

“A higher probability of above-normal minimum temperatures and unseasonal rains in some parts of the country could pose risks to the harvesting of remaining rabi crops,” the article cautioned.

What are the key risks facing the Indian economy?

While India’s economy remains relatively stable, the RBI highlighted several external and domestic risks that could affect growth and inflation in the coming months.

Trade pressures intensified in April as higher crude oil and gold imports widened the merchandise trade deficit.

“The merchandise trade deficit widened in April 2026 over March 2026 with rising import bill primarily on account of crude oil and gold imports,” the Bulletin said.

Compared to April 2025, the deficit “increased albeit marginally vis-a-vis April 2025, mainly due to rise in imports of electronic goods, gold and machinery.”

The rise in precious metals imports prompted government intervention.

“The surge in precious metals imports prompted the Government to raise custom duties on gold, silver, and platinum,” the RBI noted.

High-frequency economic indicators showed a mixed but broadly supportive picture. E-way bills maintained double-digit growth due to GST rationalisation, while electricity demand rose sharply because of higher temperatures.

“Higher temperatures led to a sharp increase in electricity demand,” the article said.

At the same time, petroleum consumption weakened because of falling demand for products such as naphtha and liquified petroleum gas, although petrol and diesel consumption continued to grow.

The labour market showed some moderation during the fourth quarter of FY26, especially in rural India.

According to the Bulletin, labour force participation and worker population ratios declined while unemployment edged higher in rural areas.

However, urban employment conditions improved.

“In April, the all-India unemployment rate... witnessed an increase driven by rural areas, while the urban unemployment rate declined,” the RBI said.

The report also noted stronger hiring momentum in manufacturing and services.

“PMI employment for manufacturing and services rose to a ten-month high in April driven by new business orders.”

On capital flows, foreign direct investment remained positive for the second consecutive month in March, although foreign portfolio investors continued to withdraw funds in April and May.

“Foreign portfolio investors continued to remain net sellers in April and May, though the pace of outflows moderated,” the Bulletin said.

The RBI further observed that system liquidity eased slightly in May after improving in April due to higher government spending, while short-term money market rates largely stayed below the policy repo rate.

Overall, the Bulletin concluded that India’s economy continues to display resilience despite elevated global uncertainty, rising commodity prices and geopolitical tensions in West Asia.

(With inputs from ANI)