A report by the Union finance ministry report has warned that India’s economic outlook faces risks over rising inflation from geopolitical tensions, elevated crude oil prices, and a potential El Niño event as well as weak investment, The Hindu Businessline reported. Most importantly, the report highlighted upside imported inflation risks, meaning that rates could end up higher than expected for imported raw materials and goods.The report, while highlighting the role of policy makers, said that India cannot afford to rest on post-COVID growth laurels, “It has to be earned every quarter. That is the challenge for policymakers”.The report prepared by the Economic Affairs Department pointed to rising inflation from the combined impact of climate-related, geopolitical, and monetary pressures. A strong El Niño could adversely affect the rabi crop by increasing heat stress and reducing soil moisture, although a favourable Indian Ocean Dipole may help mitigate some of these effects. In the near term, stronger festive demand and rising input costs are also likely to exert additional upward pressure on prices. According to Reuters, geopolitical tensions and elevated crude oil prices could intensify imported inflationary pressures, particularly following the US Federal Reserve’s 25-basis-point rate hike in September. India’s inflation indicators have also remained under pressure, with retail inflation rising to 4.82% in August, staying above the RBI’s 4% target for the third consecutive month, while wholesale price inflation accelerated to 9.92%. “Geopolitical tensions and elevated crude oil prices could also add to imported inflation pressures, particularly amid the US Federal Reserve’s 25 basis-point rate hike in September,” the report also said, as quoted by The Hindu Businessline. The report cautioned that growing supply-chain disruptions across energy, metals, electronics, food, and semiconductors could fuel inflation while weighing on economic growth. Rising interest rates in developed economies may also push up domestic bond yields, although the RBI’s recent liquidity-absorption measures could help keep financial conditions balanced. Against this backdrop, the RBI’s Monetary Policy Committee is scheduled to meet from October 5 to 7, with markets widely anticipating a further increase in the policy rate (25-basis-point increase to 5.5%) to contain inflationary pressures and anchor inflation expectations. On the investment front, the report noted that India is facing major challenges with regard to capital inflows. It pointed to near-term uncertainty over the US trade relationship, tariff pressures while also including those linked to the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, signed by President Trump on September 18. The act allows tariffs of up to 100% on the five largest buyers of Russian crude oil, including India, as well as uncertainty over crude oil prices and the lack of a clear India-specific role in global AI developments. The report expects net FDI inflows to improve this financial year compared with the previous one, but warned that Indian assets, including the rupee, could remain under short-term pressure. It called for “sustained high-quality, consistent and swift decision-making” to build investor confidence, while stressing that India should make its economy “more competition-friendly than business-friendly.”