Economy to grow despite global uncertainties: Finmin report

With the right strategies in place, continued domestic reforms, and a strong focus on infrastructure development and job creation, the economy can demonstrate resilient growth despite global uncertainties, a finance ministry report said on Tuesday.

India’s long-term growth was driven by macroeconomic stability, a resilient external sector, declining fiscal deficit, easing inflation, improving employment prospects, and high consumption expenditure, the March edition of Monthly Economic Review released by Department of Economic Affairs said.

Private capital formation held the key to the sustainability of this favourable constellation, it said, adding that public policy and regulatory measures could both facilitate and nudge the private sector to do its part.

Nevertheless, it said, while geopolitical uncertainties presented challenges for India, they also offered an opportunity to strengthen its position in international trade and manufacturing by leveraging its comparative advantages in select goods and services. With renewed and sustained focus on geopolitical developments, India could mitigate these risks and capitalise on emerging opportunities through strategic trade negotiations, domestic reforms and manufacturing investments, it said.

“That said, uncertainties stemming from global developments constitute a key risk for the growth outlook for FY26. More than trade, the perception of prolonged uncertainty may cause the private sector to put its capital formation plans on hold. The private sector and policymakers must be mindful of this risk and act urgently to avoid making uncertainty feed upon itself," it said.

The domestic economy is large and capital formation can lead to a mutually reinforcing cycle of investment-income growth-demand growth-additional capacity creation, it said.

“In contrast to normal times, action and execution have greater impacts now. It is an opportunity not to be missed," it said.

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