Economy Stable Despite Global Turbulence; El Nino Risks Loom: Finance Ministry report

New Delhi: Despite global turbulence, India's economy has remained stable, according to the monthly economic review report released by the Finance Ministry on Monday. The report revealed that India's economic activity, inflation, and external position have remained relatively stable, even amidst external risks and changing global trade dynamics.

The finance ministry stated that the external sector is well-positioned to absorb the pressures arising from global financial conditions. However, the report cautioned that an intensifying El Nino, expected to peak late in 2026, could lead to increased food inflation and reduced yields for certain crops, including wheat and mustard. This could pose downside risks to India, as the country is heavily dependent on imports of vegetable oils such as crude palm, soybean, and sunflower oils.

Additionally, the report highlighted that protein-rich items, processed foods, and edible oils are becoming major contributors to price pressures. The global economy continues to face uncertainty due to varying growth rates, oil prices, and differing interest-rate policies.

Despite these external risks, India's domestic economic activity remains steady, driven by resilient domestic demand. The report also noted that elevated food inflation is absorbing a larger share of household disposable income, which may constrain spending on non-food discretionary items. This could limit the extent to which cost-side pressures are passed on to final consumer prices.

The finance ministry is closely monitoring key global developments, including movements in sovereign bond markets. The rising yields in these markets could have both positive and negative impacts on bond yields, while the global quest for investment capital may influence the current account deficit of developing countries and the ease of financing.