Page 4 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Executive Summary

The global economy entered the second half of 2026 amid weakening growth momentum, heightened
geopolitical tensions, persistent inflationary pressures, and tighter financial conditions. According to the
World Bank, global growth is projected to moderate to 2.5 per cent in 2026, the weakest pace outside
recessionary periods since the Global Financial Crisis. Rising geopolitical risks, elevated energy prices,
supply chain disruptions, and subdued investment continue to weigh on global economic activity, while
persistent inflation and higher borrowing costs have constrained the pace of monetary policy easing
across major economies.

Despite these challenges, structural drivers of long-term growth remain intact. Rapid advances in artificial
intelligence, digital technologies, renewable energy, and clean energy investment are expected to
enhance productivity and support future economic expansion. At the same time, increasing investment
in semiconductors, critical minerals, data centres, and resilient supply chains is reshaping global
production networks. However, climate-related risks, including the emergence of El Niño, together with
elevated commodity prices and geopolitical uncertainties, continue to pose significant upside risks to
inflation, food security, and energy markets.

Global manufacturing and business activity remained uneven during June 2026. Manufacturing activity
demonstrated greater resilience than services across several advanced economies, supported by
inventory rebuilding, technology-led investment, and relatively stronger domestic demand. The United
States remained the strongest-performing major advanced economy, while business activity across
Europe remained subdued. China maintained positive manufacturing momentum, although domestic
demand and property sector challenges continued to moderate growth. Looking ahead, the pace of global
recovery will depend on easing geopolitical tensions, stabilisation of energy markets, recovery in
international trade, and sustained productivity-enhancing investments.

India continued to demonstrate remarkable macroeconomic resilience despite a challenging global
environment characterised by elevated crude oil prices, slowing global trade, and geopolitical uncertainty.
Supported by robust domestic demand, sustained public capital expenditure, resilient manufacturing and
services activity, and sound macroeconomic fundamentals, India retained its position as the world's
fastest-growing major economy. The World Bank projects India's economy to grow by 6.6 per cent in FY
2026–27, with growth expected to strengthen further over the medium term as infrastructure investment,
digital transformation, manufacturing expansion, and structural reforms continue to support economic
activity.

Inflation remained broadly within the Reserve Bank of India's comfort zone despite renewed pressures
from higher food and global energy prices. Consumer price inflation remained below the medium-term
target, while the Reserve Bank of India maintained a calibrated monetary policy stance, balancing price
stability with growth considerations. The Government also introduced the revised Wholesale Price Index
(Base Year: 2022–23) together with a comprehensive Producer Price Index framework, strengthening
India's statistical architecture for monitoring producer-side inflation and industrial cost dynamics.

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