Iran-US deal risks, adverse monsoon pose headwinds to growth: RBI
Mumbai: India’s growth may face headwinds due to any setback to the US-Iran peace deal or agreement and an adverse southwest monsoon, as the global economic landscape remains fragile, the Reserve Bank Bulletin said on Monday.
Geopolitical tensions and trade disruptions persisted despite the recent interim peace deal in West Asia, said an article on State of the Economy published in the June Bulletin.
The global economic landscape remains fragile despite some respite gained through the interim US-Iran peace agreement, the article said.
“Any breakdown of the agreement may reignite material risks in terms of inflationary expectations, disrupted critical energy infrastructure, delayed investment spending, food security concerns, adverse financial stability outlook and structurally lower growth,” it noted.
Amid the challenging global environment, the Indian economy grew at 7.8 per cent in Q4 2025-26, supported by private consumption and fixed investment. High-frequency indicators during the first two months suggest sustained economic momentum in 2026-27, it added.
Despite a pick-up in May, the Consumer Price Index (CPI)-inflation remained anchored. India’s external sector remained resilient, supported by FDI inflows and adequate foreign exchange reserves.
“The Indian economy entered this turbulence with much better fundamentals relative to many other countries to sustain the shock,” it said.
The article further said that the passthrough of higher commercial LPG prices, however, led to a pick-up in inflation in the ‘restaurants and accommodation services’.
Among all divisions, the inflation in ‘personal care, social protection and miscellaneous goods and services’ remained the highest. Overall, 8 out of 12 divisions witnessed a sequential increase in inflation in May.
Among other factors, the month-on-month price build-up in CPI-Food and Beverages during May could also be attributed to aseasonal uptrend during summer, which was observed across all classes/subclasses, except fruits and nuts.
“This broad-based pickup in food prices appeared to have continued in June as suggested by the daily prices data available up to June 18,” the article said.
Within foodgrains, prices of rice and wheat as well as major pulses recorded an uptick.
Among perishables, prices of major vegetables — potato, onion and tomato — edged up further. The month-on-month increase in the prices of edible oils remained broad-based.
On disruptions to global energy supply chains, the article said the price of the Indian basket crude oil remained elevated despite easing in June from the peak observed in April.
A surge in international prices has been partially passed on to retail consumers through upward price revisions for petrol and diesel in four tranches in May, with cumulative increases of around Rs 7.5 per litre and Rs 7.6 per litre, respectively.
