The Indian economy appears to be in a ‘Goldilocks’ moment, a Finance Ministry report said on Friday. However, it cautioned about the external challenges that could impact India’s growth trajectory.

A Goldilocks moment describes a ‘perfect’ market where interest rates are low, economic growth remains stable and inflation appears moderate.

No major imbalances

“With no major imbalances in the macro aggregates, a subdued inflation rate combined with a growth-supportive monetary policy stance, India’s macroeconomic health is in a relative Goldilocks situation,” the Monthly Economy Review (MER) by the Economic Affairs Department said.

This comes at a time when the Monetary Policy Committee (MPC) lowered the policy interest rate by 100 basis points over the last three review meetings. Retail inflation based on the Consumer Price Index (CPI) has dipped to 75-month low of 2.82 per cent. And the economy is expected to grow at 6.3-6.8 per cent this fiscal.

Rural demand up

The report highlighted that the growth momentum from the fourth quarter of the last fiscal continues. Various high frequency economic indicators, such as e-way bill generation, fuel consumption and PMI, are showing continued resilience. Significantly, rural demand has strengthened further while urban consumption, too, is picking up as reflected by the rise in air passenger traffic and hotel occupancy.

But there are areas of concern.

Crude oil prices

“There are signs of softening in areas like construction inputs and vehicle sales. Also, there are some external challenges,” the report said.

It took note of the brief Israel-Iran war, followed by the US intervention that pushed the price of crude oil sharply higher. Its persistence would have threatened India’s growth and fiscal outlook in the current financial year.

“Thankfully, there is a ceasefire, and oil prices have retreated sharply. There is ample global supply of oil, but insurance costs and the perceived risk of potential closure of choke points might cause the landed price to rise,” it said.

Though this risk has receded, it is too soon to sound the ‘all clear’. But, then, “we have to get used to doing the balancing act or the high-wire act for some time to come,” it said.

More opportunities

“We seek to build on it through critical agriculture, manufacturing, resources and technology missions and deregulation initiatives that unleash productivity. These may be nervous but exciting times for the economy. Geopolitics may offer us opportunities that appeared remote previously. It is up to us to be flexible enough to ride the tide,” it said.

That said, global growth continues to face headwinds, with persistent trade frictions, heightened policy uncertainty and geopolitical conflicts. “These external challenges could potentially impact India’s growth trajectory and warrant close and continuous monitoring,” it said.

Published on June 27, 2025