Page 4 - Policy Economic Report - Jan 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Executive Summary

According to IMF, global growth will hold steady at 3.3 percent this year, an upward revision of 0.2
percentage points compared to October estimates, with most of the improvement accounted for by the
United States and China. The growth is driven by easing trade tensions, higher-than-expected fiscal
stimulus, accommodative financial conditions, the agility of the private sector in mitigating trade
disruptions and improved policy frameworks especially in emerging market economies.

India’s growth outlook remains robust, underpinned by strong macroeconomic fundamentals and broad-
based demand momentum. As per the First Advance Estimates, real GDP and Gross Value Added (GVA)
are projected to grow by 7.4% and 7.3% respectively in FY26. A strong agricultural performance has
bolstered rural incomes and consumption, while improvements in urban demand- supported by tax
rationalization measures indicate a broadening of the consumption base. India’s potential growth is
estimated at around 7%, with real GDP growth for FY27 projected in the range of 6.8-7.2%, reflecting
sustained medium-term growth capacity amid a challenging global environment.

India recorded the lowest Inflation rate since the beginning of the CPI series, with April-December 2025
average headline Inflation coming in at 1.7%, attributing to general disinflationary trend in food and fuel
prices.

The IMF projects inflation at 2.8% in FY26 and 4.0% in FY27. The RBI’s forecast for headline Inflation for
Q1 and Q2 of FY27 currently stands at 3.9 and 4%. Looking ahead, the Inflation outlook remains benign,
supported by favorable supply side conditions and the gradual pass-through of GST rate rationalization.

Agriculture and allied activities continue to play a stabilizing role in India’s growth cycle by supporting
rural demand and income security. The sector is estimated to grow by 3.1% in FY26, supported by a
favorable monsoon during H1 FY26. Industrial activity is expected to gain momentum in FY26, with the
industrial sector projected to grow by 6.2%, up from 5.9% in FY25. The sector recorded growth of 7.0% in
the first half of FY26, exceeding the growth of 6.1% in H1 of FY25. Services sector is estimated to have
grown by 9.1% in FY26, up from 7.2% in FY25, indicating a further acceleration in services-led expansion.
Services’ share in GDP rose to 53.6% in H1 FY26, while its share in GVA reached a historic high of 56.4% as
per the FY26 First Advance Estimates.

India’s labour market continues to demonstrate resilience alongside economic expansion. In Q2 (July to
September 2025) FY26, total employment stood at 56.2 crore persons (aged 15 years and above),
reflecting the creation of approximately 8.7 lakh new jobs compared to Q1(April to June 2025) FY26.

On the trade front, India’s total exports reached record levels of USD 825.3 billion in FY25 and USD 418.5
billion in H1 FY26, driven by strong growth in services exports and sustained momentum in nonpetroleum,
non-gems, and jewelry exports. India’s share in global merchandise exports increased from 1% in 2005 to
1.8% in 2024. According to UNCTAD’s Trade and Development Report 2025, India ranks third among
countries in the Global South in terms of the diversity index of trade partnerships, following China and the
UAE. India’s index score of 3.2 exceeds that of all countries in the Global North, underscoring its resilience
in the face of tariff uncertainties and other emerging challenges.

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