It is just too soon to sound the ‘all clear’ on the risk of rising oil costs, regardless that the risk from the Israel-Iran battle has receded following the ceasefire between the two nations, the Ministry of Finance mentioned 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 battle may have threatened India’s progress and financial outlook for the present monetary yr 2025-26.
However, the two nations 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 yr,” 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 mentioned that the Indian economic system might expertise “nervous but exciting times” in the days forward.
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Overall, the report famous that with no main components main to an imbalance in the nation’s macroeconomic aggregates, a subdued inflation fee and a “growth-supportive monetary policy stance”, India’s macroeconomic well being is in a “relative goldilocks situation”.
While highlighting the 6.5% progress actual GDP progress estimate 2024-25, the report mentioned 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 mentioned. “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 lodge occupancy.
However, it additionally identified that there are indicators of softening of demand in areas like development inputs and automobile gross sales.