Weekly economy wrap: Inflation, current account surplus set policy tone

India's macro picture stayed broadly resilient this week, but higher fuel and food prices, global uncertainty, and policy adjustments kept pressure on households and companies

India’s economy offered mixed signals this week, including a surprise current account surplus in the March quarter, steady global confidence in India’s growth prospects, and a sharp rise in corporate debt raising after the Reserve Bank of India’s recent measures.

 

But the same week also showed pressure points. Retail inflation rose in May, LPG subsidy support under Ujjwala was reduced, outward FDI commitments fell month-on-month, and global agencies flagged energy prices as a key risk to growth.

 

Current account posts Q4 surplus

 

The current account recorded a surprise surplus of $7.1 billion, or 0.7 per cent of GDP, in Q4FY26. The improvement was driven by strong services exports and record remittance inflows, which helped offset the merchandise trade gap. 

 

 

For FY26, the current account deficit stood at 0.6 per cent of GDP, unchanged from FY25. 

 

Inflation rises in May

 

Retail inflation rose to 3.93 per cent in May from 3.48 per cent in April, driven by food inflation at 4.78 per cent. Food prices remained the key reason for the uptick, with rural inflation staying higher than urban inflation.

 

Ujjwala subsidy quota reduced

 

The government cut the annual subsidised LPG refill quota under the Pradhan Mantri Ujjwala Yojana from nine cylinders to four, while retaining the ₹300 subsidy per 14.2-kg cylinder. The annual direct benefit will now be ₹1,200 per household. The move comes at a time when rising international LPG prices have increased the financial burden on public sector oil marketing companies (OMCs).

 

Growth forecasts stay resilient

 

Fitch lowered India’s FY27 growth forecast to 6.4 per cent, citing the impact of the US-Iran war and higher energy prices on consumption. The World Bank, however, said India would remain the fastest-growing major economy, projecting 6.6 per cent growth in FY27 and 7.2 per cent in FY28.

 

VB-G RAM G gets allocation

 

The government announced an interim allocation of ₹95,692 crore under the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Grameen), ahead of its July 1 rollout. The scheme is meant to ensure continuity as the government transitions from MGNREGA.

 

Outward FDI falls in May

 

Indian firms’ outward FDI commitments declined 49.02 per cent month-on-month to $4.49 billion in May, mainly due to lower equity investments, loans, and guarantees. On a year-on-year basis, commitments were still up 34.6 per cent.

 

Ethanol push gets tax support

 

The Centre exempted E22, E25, E27 and E30 petrol blends from central excise duty, subject to conditions. The government said higher-blend rollout would follow testing and consultations.