Indian economy shows recovery despite global uncertainties, private investment gains momentum: Report
New Delhi, July 29
The Indian economy has remained resilient in recent months despite an uncertain global macroeconomic environment, with high-frequency indicators pointing to a broad-based recovery across sectors and a sharp rise in industrial credit signalling a revival in private sector investment, according to a report by Kotak Institutional Equities.
The report said the economy has continued to hold up well despite headwinds from geopolitical tensions in West Asia and weather-related risks, with manufacturing, construction, services, consumption and labour market indicators largely showing steady or improving trends.
"The Indian economy seems to be holding up rather well in the current uncertain macroeconomic environment, with most high-frequency indicators suggesting steady or improving growth outlook across sectors," the report said.
According to Kotak Institutional Equities, one of the strongest indicators of the ongoing recovery is the sharp increase in credit flowing to industries, which reflects growing investment activity by the private sector.
"In particular, the sharp increase in industry credit across sectors suggests a broad-based pick-up in private sector investment," the report noted.
The brokerage expects this momentum to continue as companies accelerate investments in value-added manufacturing segments, supported by government policy initiatives.
"We expect the momentum to continue as the private sector invests aggressively in value added manufacturing in chemicals, electricity and electronics chains, encouraged by supportive government policies," the report added.
Data cited in the report showed industrial credit expanded 18 per cent year-on-year in May 2026, while total gross bank credit also recorded robust growth. Credit growth remained strong across several manufacturing industries, including engineering, iron and steel, chemicals and infrastructure, reflecting improving business confidence and capital expenditure.
Despite the encouraging domestic indicators, the report cautioned that India's macroeconomic outlook has become more uncertain due to external developments.
According to the report, the re-escalation of the Iran-US conflict, resulting in higher crude oil prices, along with deficient rainfall during the ongoing monsoon season, has raised concerns over inflation, particularly food inflation.
"India's macroeconomic outlook has become uncertain again, given (1) the re-escalation in the Iran-US conflict, leading to higher crude oil prices and (2) deficient rainfall in the ongoing monsoon season raising concerns about food inflation," the report said.
However, Kotak believes these risks remain manageable at present.
"India's macroeconomic outlook appears manageable for now, but could deteriorate in the event of a prolonged conflict or could improve in the case of a de-escalation in the Iran-US war," the report said.
The brokerage also expressed confidence that geopolitical tensions may not remain elevated for an extended period.
"We continue to believe that economic and political compulsions will restrain both Iran and the US from indulging in a prolonged conflict," the report added.
— ANI
Reader Comments
Kuch toh positive news mili! 🙏 The manufacturing and infrastructure push is real — I see new factories coming up in my district. But the government needs to ensure that this growth translates into jobs for our youth. GDP numbers are fine, but what about employment?
As someone who works in international finance, I've been tracking this closely. India's relative insulation from global shocks is impressive. The focus on value-added manufacturing in chemicals and electronics is smart — it reduces dependence on imports. The Iran situation is concerning for crude though.
My father runs a small engineering unit near Pune. He says bank credit has indeed become easier to access this year. But we still face issues with raw material costs and power supply in some areas. The recovery seems real but it's not reaching everyone equally. Still, better than most countries! 🤞
One must give credit to the policy continuity and infrastructure push. The PLI schemes are working — I work in electronics manufacturing and we've seen massive capacity expansion. However, the report's caution on deficient rainfall is very real. Farmers in my village are worried about kharif output. Hope the government has contingency plans.
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