This Week In Economics (May 1–7)
Welcome to another edition of This Week In Economics, where I compile all the biggest economic news of the week in context of India.
Note: There is no need to make notes out of it, you can simply read the headlines and the content once in a while, that’ll be more than enough for most exams.
1. RBI on India’s Investment Story
RBI Deputy Governor Poonam Gupta argued that India’s investment contribution to growth is being routinely undercounted or ignored, and that the economy may have a much higher non-inflationary growth potential than conventional estimates suggest.
Simultaneously, IMF’s Asia-Pacific Director Krishna Srinivasan warned that India should do more to attract FDI, pointing out that net FDI flows have recently gone close to zero, and that rising youth unemployment, tighter financial conditions, and uneven AI adoption could become bigger structural issues for the region.
2. IMF Paper: Digitalisation Boosting MSME Productivity
An IMF working paper found that India’s digitalisation reforms in public administration have improved productivity in MSMEs in states that have embraced such changes, with states undertaking more public administration digitalisation experiencing higher productivity growth and lower productivity dispersion among firms.
However, the benefits are not evenly distributed, states that lag in digital governance see weaker productivity outcomes, risking a two-speed MSME ecosystem where firms in digitally advanced states outperform those in less developed regions.
To read full paper you can visit this link: Issue 086: Public Administration Digitalisation and Microenterprise Productivity in India
3. Oil Shock & Geopolitical Pressure on India’s Economy
After US-Israel strikes on Iran and the effective closure of the Strait of Hormuz sent Brent crude from $80 to $120 in under a week, India, which imports 85% of its crude, faced significant pressure, with estimates suggesting a $10 increase in crude prices could widen India’s current account deficit by 40–50 basis points.
So far India’s policy response to rising oil prices and geopolitical risks remains cautious, the country is prioritising macroeconomic stability over stimulus as inflation pressures and second-order effects begin to emerge.
4. RBI Increases Domestic Gold Reserves
The RBI increased the domestic share of gold reserves to 77.23% in FY26, with holdings rising to 680 metric tonnes even as overall forex reserves and gold value expanded.
5. US Revives Section 301 Investigations Against India
The US government has revived Section 301 investigations into India over excess capacity and forced labour concerns, raising risks of tariffs and tighter compliance for key export sectors. This adds a new layer of trade tension even after the February 2026 interim trade deal.
7. Global Risks & India’s Resilience
India’s growth is strong but moderating, averaging 8.2% from 2021–25, with gradual stabilization projected around 6.5–7% going forward, amid global growth slowdown risks and tighter monetary policies in advanced economies.
Ciao, until next week’s edition.
