3 min readAug 28, 2026 06:45 AM IST First published on: Aug 28, 2026 at 06:45 AM ISTLeading economic indicators indicate that the country’s underlying economic growth momentum has held up in the first quarter and beyond. This view has been reinforced in the State of the Economy report prepared by economists at the RBI as well as in the finance ministry’s monthly economic review. However, the outlook remains clouded with risks to growth emanating from continuing geopolitical and trade-related uncertainties, supply-chain pressures, volatile energy prices, and a strengthening El Niño.Domestic household consumption remains healthy — there are several markers to that effect. As the report shows, e-way bill generation has been firm, and GST revenues are healthy. Passenger vehicle sales are strong, as are tractor and two-wheeler sales. At the same time, the index of industrial production was up 5.8 per cent in the quarter, aided by the manufacturing sector. Electricity demand has also been steady. Firms in both manufacturing and services sectors have also witnessed an improvement in their operating profits as per the report. Bank credit growth has also been growing at a brisk pace across sectors, which bodes well for both production (credit to industry) and consumption (retail loans). The optimism has been strengthened by the recovery in the monsoon, which has helped with kharif sowing. And despite an uncertain external front, non-oil exports have seen an uptick, growing at 12.8 per cent in the first four months of the year, perhaps aided by the currency’s depreciation. Public sector capex, too, has held up, with the Centre’s expenditure growing by roughly 24 per cent in the quarter.AdvertisementIn the August Monetary Policy Committee meeting, the central bank had projected the economy to grow at 7 per cent in the first quarter. This is in line with assessments by agencies such as Crisil and ICRA. Early next week, the National Statistics Office will release its estimate of GDP growth. Growth may well surprise on the upside. But the external environment will continue to weigh heavy. This calls for a careful and calibrated approach. As the economic review notes, “recent years have been a time for hunkering down and battening down the hatches. Coming years will be no exception.” Policymakers will have to deftly navigate this challenging period.