Introduction
India’s economy has remained resilient despite heightened global uncertainty arising from the ongoing West Asia conflict, which has disrupted energy markets, logistics networks and global supply chains. High-frequency indicators suggest that while some supply-side pressures emerged during March 2026, domestic demand conditions remained relatively robust. Manufacturing and services activity continued to expand, with the Purchasing Managers’ Index (PMI) remaining in expansionary territory at 53.9 and 57.5, respectively, in March 2026. Infrastructure activity remained supported by continued public investment, while retail vehicle sales registered strong growth across passenger vehicles, two-wheelers and commercial vehicles. Government initiatives aimed at strengthening energy security, semiconductor manufacturing, logistics resilience and industrial competitiveness are expected to support medium-term growth despite near-term external challenges. India’s external sector demonstrated resilience in FY26 despite a challenging global trade environment. Total exports of goods and services increased by 4.2% year-on-year to a record high of US$ 860.1 billion. Merchandise exports reached US$ 441.8 billion, while non-petroleum exports touched a historic high of US$ 387.8 billion, supported by strong growth in electronic goods and other diversified export segments.
Services exports crossed the US$ 400 billion milestone for the first time, rising to US$ 418.3 billion and generating a net services surplus of US$ 213.9 billion, which financed 64.2% of the merchandise trade deficit. Total imports rose by 6.5% to US$ 979.4 billion, reflecting strong domestic demand, while India’s foreign exchange reserves and diversified trade linkages continued to provide stability amid global volatility and disruptions arising from the West Asia conflict.
Domestic financial conditions remained supportive, aided by ample liquidity, strong credit growth and a stable financial system. As of March 31, 2026, bank credit growth stood at 17.1% year-on-year compared with 11.0% a year earlier, while the total flow of financial resources to the commercial sector increased by 38.2% year-on-year to Rs. 44.7 lakh crore. Credit growth remained broad-based, led by services and MSME lending. Labour market indicators also continued to improve, with monthly PLFS data indicating rising labour force participation and moderating unemployment. White-collar hiring remained healthy across sectors such as insurance, BPO/ITES, hospitality and retail. Together with continued policy support and structural reforms, these trends reinforce confidence in India’s medium-term growth prospects despite elevated global uncertainties.
In April 2026 Report, the following key indicators highlighted improved performances:
- Retail inflation remained moderate at 3.4% in March 2026, compared with 3.2% in February 2026. Food inflation increased to 3.9%, while core inflation remained stable at around 3.7%, indicating that underlying price pressures remained contained despite higher global commodity and energy prices.
- Inflation across major CPI divisions remained largely range-bound and below the RBI’s upper tolerance limit. The only notable exception continued to be the personal care and miscellaneous category, where inflation remained elevated at around 18-19%, largely due to rising gold and silver prices. Most other categories recorded moderate inflation, reflecting limited broad-based price pressures.
- Agricultural supply conditions remained supportive despite emerging global supply disruptions. Fertiliser availability remained adequate due to comfortable inventories and government measures to secure feedstock supplies, while strategic efforts to strengthen food and input security continued to support agricultural production ahead of the upcoming crop seasons.
- India’s total exports of goods and services reached a record high of US$ 860.1 billion in FY26, growing by 4.2% year-on-year. Services exports crossed US$ 400 billion for the first time, reaching US$ 418.3 billion and generating a net services surplus of US$ 213.9 billion, reinforcing the resilience of India’s external sector.
- Gross foreign direct investment (FDI) inflows increased by 18.1% year-on-year to US$ 88.3 billion during April-February FY26. Net FDI also improved significantly to US$ 6.3 billion compared with US$ 1.5 billion in the corresponding period of the previous year, reflecting sustained investor interest in India despite global uncertainties.
- India continued to maintain strong external sector buffers. Foreign exchange reserves remained at comfortable levels during FY26, supporting exchange rate stability, strengthening resilience against global shocks and providing substantial import cover and external debt coverage.
- The Indian rupee experienced depreciation pressures during March and April 2026 amid elevated crude oil prices, foreign portfolio outflows and heightened global risk aversion linked to the West Asia conflict. The rupee breached Rs. 95 per US dollar intraday during March 2026, while RBI interventions helped maintain orderly market conditions.
- Overall bank credit growth strengthened further during FY26, rising by 17.1% year-on-year as of March 31, 2026. Non-food credit growth remained robust, while services sector credit recorded the strongest expansion, driven by higher lending to segments such as shipping and computer software.
- Bank credit to the MSME sector remained strong, growing by 27.5% year-on-year in February 2026 compared with 12.1% a year earlier. Credit to micro and small enterprises increased by 30.4%, reflecting continued improvement in formal credit access and support for entrepreneurial activity.
- The total flow of financial resources to the commercial sector increased significantly to Rs. 44.7 lakh crore as of March 31, 2026, recording growth of 38.2% year-on-year. Strong growth in bank credit, corporate bond issuances and external commercial borrowings contributed to improved financing conditions for businesses.
- Digital economic activity remained strong, with e-way bill generation touching an all-time high of 140.6 million in March 2026. April 2026 data also indicated continued resilience in goods movement, reflecting sustained domestic economic activity despite external disruptions.
- Demand conditions remained resilient, with retail vehicle sales growing by 25.3% year-on-year in March 2026. Growth was broad-based across two-wheelers, passenger vehicles and commercial vehicles, while tractor sales also recorded positive annual growth, indicating continued support from both rural and urban demand.
- India’s defence exports reached an all-time high of Rs. 38.4 thousand crores in FY26, registering growth of 62.7% year-on-year. Defence exports were supported by policy reforms, improved ease of doing business and expanding participation in global defence supply chains.
- India continued to strengthen its trade diversification strategy through trade agreements and ongoing negotiations with major partners including the European Union, Oman, the United Kingdom, New Zealand, Canada, Chile, Peru and the United States, while implementing additional trade facilitation measures to support exporters during the West Asia crisis.
- Foreign portfolio investment (FPI) flows remained volatile during FY26, with cumulative net outflows of US$ 16.6 billion. Outflows intensified in March 2026 amid heightened geopolitical uncertainty and global risk aversion, highlighting the sensitivity of capital flows to external developments.
- India remained the world’s largest remittance recipient, with inflows reaching a record US$ 135.4 billion in FY25. During April-December FY26, remittances increased by 10.1% year-on-year to US$ 110.9 billion, providing continued support to the country’s external account.
Retail inflation remained moderate despite emerging global commodity price pressures. Headline CPI inflation increased to 3.4% in March 2026 from 3.2% in February, while food inflation rose to 3.9%. Core inflation remained stable at around 3.7%, indicating limited second-round effects from higher energy costs. Recognising the evolving risks from global supply disruptions and elevated crude oil prices, the Monetary Policy Committee maintained the policy repo rate at 5.25% in its April 2026 meeting while retaining a neutral stance. The RBI projects CPI inflation at 4.6% for FY27, with risks tilted upward due to global energy market developments.
Labour market indicators continued to show gradual stabilisation during H2 FY26, supported by rising labour force participation and moderating unemployment. According to the monthly Periodic Labour Force Survey (PLFS), labour market conditions remained broadly stable with limited month-to-month volatility, reflecting sustained employment generation across sectors and continued resilience in economic activity. The annual PLFS findings also indicate a gradual shift towards regular wage employment and increasing participation in non-farm sectors, highlighting ongoing structural transformation within the labour market.
High-frequency labour market indicators also suggest continued hiring momentum. White-collar recruitment remained robust across sectors such as insurance, BPO/ITES, hospitality, retail and real estate, while employment demand continued to be supported by growth in domestic economic activity. The labour market has also benefited from rising formalisation, expanding digital adoption and improving access to finance, which have strengthened employment opportunities across both organised and unorganised segments of the economy.
The medium-term employment outlook remains positive, supported by ongoing structural reforms, investments in infrastructure and manufacturing, and initiatives aimed at strengthening workforce skills and productivity. Government efforts to promote industrial development, expand MSME financing, strengthen digital capabilities and improve participation in higher-productivity sectors are expected to support employment creation and labour market resilience over the coming years.
