In its monthly economic review, the ministry said the disruption of shipping and energy flows through the Strait of Hormuz remains the most critical variable shaping India’s external sector and inflation outlook, as geopolitical tensions continue to affect global oil markets.

The report noted that recent increases in fuel prices, combined with rising upstream production costs, are likely to gradually feed into retail inflation through higher transportation, energy and food expenses.
Officials warned that a significant rainfall shortfall during the monsoon season could further intensify inflationary pressures by affecting agricultural output and food supplies. Such a scenario could also weaken rural consumption and weigh on broader economic growth.

“The near-term outlook for the Indian economy is one of cautious resilience,” the ministry said, while emphasizing the need for continued policy vigilance amid multiple external and domestic risks.
The report highlighted a combination of elevated global energy prices, depreciation of the Indian rupee, rising input costs and the possibility of below-normal rainfall as factors that could complicate inflation management in the months ahead.

India remains heavily dependent on imported crude oil, making it particularly vulnerable to supply disruptions and price volatility stemming from geopolitical developments in the Middle East. Any prolonged disruption to maritime traffic through the Strait of Hormuz could increase import costs and widen inflationary pressures across sectors.

Despite these concerns, inflation has remained relatively contained. India’s annual retail inflation rate rose marginally to 3.48% in April, remaining below the target level monitored by the Reserve Bank of India.
The assessment comes as policymakers seek to balance economic growth with price stability amid an uncertain global environment marked by geopolitical tensions, energy market volatility and weather-related risks to agricultural production.

The Finance Ministry publishes its economic review on a monthly basis to assess macroeconomic trends and emerging risks facing the Indian economy.