Demand driving growth, but economic outlook ‘somewhat clouded’ by supply issues: RBI

Key Takeaways

• While India’s domestic demand remains a key driver of growth, the near-term outlook for the economy is “somewhat clouded” due to supply side pressures brought on by the West Asia crisis, the Reserve Bank of India (RBI) said in a new report.
• “Domestic demand continues to be the key driver of growth,” the RBI said in its latest State of the Economy report as a part of its monthly bulletin for April 2026.
• “However, the near-term outlook is somewhat clouded by supply side pressures.” “Although headline inflation remains firmly within the tolerance band, the pass through to domestic prices needs to be monitored,” it added.
• “The financial conditions, crude oil prices and capital flows continue to pose challenges to the external sector outlook.” Mixed demand conditions The central bank noted that, while e-way bills continued to hit double-digit growth, and petrol and diesel consumption continued to grow, overall petroleum consumption fell in April due to a sharp fall in the consumption of naphtha, liquified petroleum gas (LPG) and other petroleum products.
• Similarly, while higher temperatures led to a sharp increase in electricity demand, the monthly number of toll transactions continued to decline, although the RBI attributed this to the introduction of the FASTag Annual Pass scheme in August 2025.