India's Economic Outlook and Global Challenges

India's Growth Projections

Union Finance indicated that India's economy is anticipated to grow by 6.5% in 2025-26, driven by robust domestic consumption and investment demand, despite global uncertainties.

• Inflation Forecast: Expected to stabilize around 4% in FY26, aided by declining crude oil prices.
• Economic Survey: Predicted GDP growth in the range of 6.3-6.8% for FY26.
• IMF and World Bank Forecasts: Both reduced growth forecasts for India to 6.2% and 6.3% respectively, due to global uncertainty.

Domestic Factors Supporting Growth

• Tax Relief Measures: Expected to boost private consumption and investment.
• Investment Activities: Gaining momentum with increased capacity utilization and government infrastructure spending.
• Agriculture Sector: Bright growth prospects supported by robust crop production and healthy reservoir levels.
• Services and Remittance Receipts: Anticipated to remain in surplus, offsetting trade deficits.

Foreign Direct Investment (FDI) and External Sector

• Gross FDI: Remained strong, reflecting robust macroeconomic fundamentals. Net FDI moderated due to higher repatriations.
• Current Account Deficit (CAD): Expected to remain within sustainable levels for 2024-25 and 2025-26.
• Indian Rupee: Maintained as one of the least volatile currencies, indicating a resilient external sector.

Global Economic Challenges and Policy Recommendations

The global economy is facing significant uncertainty, which necessitates strategic policy actions.

• Policy Shifts: Major economies' policy changes present headwinds for global growth.
• Protectionist Measures: May impede global investment and financial flows.
• EMDEs Preparedness: EMDEs must cautiously utilize policy tools to maintain macro-financial stability and address public debt concerns.

Finance minister emphasized the need for global and national policy actions to foster a favorable external environment, enhance macroeconomic stability, and address structural bottlenecks to absorb global economic spillovers effectively.