The RBI in its April 2026 State of the Economy report said that domestic demand continues to be the main engine of growth, but the near‑term outlook is clouded by supply‑side pressures linked to the ongoing West Asia crisis.
Key Developments
- Domestic demand remains the chief driver of GDP growth.
- Supply‑side pressures from higher crude oil prices and geopolitical tensions are dampening the short‑run outlook.
- Inflation stays within the tolerance band, but price‑pass‑through to consumers needs close watch.
- Petroleum consumption shows mixed trends: e‑way bills and petrol/diesel use grow double‑digit, while naphtha, LPG and other products fall.
- Rural automobile sales (tractors and two‑wheelers) grow double‑digit, though growth moderates sequentially.
- Labour market shows a slight slowdown – participation and worker‑population ratios dip, unemployment rises, especially in rural areas.
- Industrial activity is resilient; core‑industry index rises, supported by cement, steel and electricity.
- Services sector remains robust, with a higher Services PMI, but export orders weaken due to the West Asia conflict.
Important Facts
- e‑way bills recorded double‑digit growth in April 2026.
- Petrol and diesel consumption continued to rise, while overall petroleum use fell because of a sharp drop in naphtha and LPG consumption.
- Electricity demand surged owing to higher temperatures.
- The FASTag Annual Pass scheme launched in August 2025 explains the decline in toll‑transaction numbers.
- Labour force participation rate and worker‑population ratio fell, while the unemployment rate rose, driven mainly by rural distress.
- Share of regular salaried employment increased, especially in secondary and tertiary sectors.
- Sowing progress in the summer season exceeded normal acreage; all major crops except rice are planted on larger areas.
- Manufacturing