Inflation Lowest In Over 6 Years, Jobs & Trade Steady As India Starts FY26 Strong, FinMin Data Shows
It’s raining stability in services and consumption, resilience in trade performance and surplus in India’s capital and financial account, giving generous space to India’s economy to sustain its growth momentum in the first quarter of FY26, powered by robust domestic demand, resilient business, services activity and favourable onset of the southwest monsoon. While the manufacturing and construction sectors continued to expand, the services sector anchored the overall economic growth in Q1 of FY26, states the monthly economic review (MER) of the Finance Ministry presented on Monday.
This upbeat domestic outlook comes against the backdrop of a turbulent global environment marked by high commodity prices, external demand imbalances, and lingering geopolitical uncertainties.
Inflation Cools, Jobs Rise
On the inflation front, there's notable relief for consumers. Headline inflation, as measured by the Consumer Price Index (CPI), has shown a sharp downward trend, driven primarily by falling food prices, especially vegetables and pulses. Retail inflation dropped to a 77-month (nearly 6.5 years) low of 2.1 per cent in June 2025.
The labour market also appears to be on stable ground. White-collar hiring recorded a double-digit year-on-year increase, while formal job creation saw a significant boost. The Employees’ Provident Fund Organisation (EPFO) reported an all-time high in net member additions during May 2025.
Trade Holds Firm, Remittances Hit Record High
India’s external sector remained resilient. Total exports of goods and services grew by 5.9 per cent year-on-year, while remittance inflows soared to a record $135.5 billion in FY25, marking a 14 per cent jump. These inflows have not only supported household consumption but also helped maintain overall macroeconomic stability.
On the fiscal front, the Union Government is making steady progress in fiscal consolidation, with a clear focus on improving the quality of expenditure. Revenue mobilisation remains stable, and both capital expenditure and grant-in-aid to states for capital asset creation are set to double between FY22 and FY26.
Some Caution Ahead
Despite the largely optimistic tone, the Finance Ministry flags a few risks. Credit growth remains sluggish, and private investment appetite is still subdued, even in the face of monetary easing and strong bank balance sheets, indicating a degree of borrower caution. Additionally, ongoing uncertainty over US tariff policies may affect India’s trade performance in the upcoming quarters.
Still, the ministry remains confident that the Indian economy is poised to maintain its steady course through FY26.
(Mukherjee is a Contributing Writer. A business journalist for more than 15 years, she has written extensively on economy, policy, and international relations)
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