A successful bilateral trade agreement between India and the US could transform current challenges into economic opportunities by expanding market access and boosting exports, according to the Finance Ministry’s Monthly Economic Review released on Tuesday.The report comes amid ongoing negotiations between the two nations, with an interim trade agreement expected before July 8. India is seeking full exemption from a 26 per cent reciprocal tariff imposed by the US on domestic goods.The US had implemented the additional tariff on Indian products starting April 2, but suspended it for 90 days, until July 9. However, the baseline 10 per cent American tariff remains in effect.Despite global uncertainty, the report claimed India’s position as a leading investment destination. It stated that foreign direct investors are likely to respond positively to reforms that strengthen medium-term growth prospects.The ministry emphasised the importance of policies aimed at improving the productivity and skills of the country’s young workforce- key factors in stimulating investment and economic growth.India continues to maintain its status as the world’s fastest-growing major economy, with relatively limited downward revisions in growth forecasts. According to the IMF’s World Economic Outlook (April 2025), India’s real GDP growth for FY26 is projected at 6.2 per cent, 30 basis points lower than the January estimate, amid rising global uncertainties and trade tensions.Various institutions forecast India’s FY26 growth in the range of 6.3 to 6.7 per cent, underpinned by strong domestic fundamentals, prudent macroeconomic policies, higher government capital expenditure, and easing inflation.As of April 2025, the Indian economy demonstrates resilience, driven by robust private consumption, especially a rural rebound, and steady growth in services exports. “The services sector continues to post healthy expansion, offsetting softness in merchandise exports. The Indian rupee has remained relatively stable, and foreign exchange reserves continue to provide a cushion against external shocks,” the report stated.Government-led capital expenditure remains a key pillar of economic activity, helping shield the economy from external volatility. Direct tax incentives, fiscal measures, and the Reserve Bank of India’s monetary policy are expected to further support consumption and investment. “These could accelerate the recovery and push growth towards the upper end of forecasts, ranging from 6.3 per cent to 6.8 per cent, as cited in the latest Economic Survey,” the report added.“This may be no moment for self-congratulation but, equally, it is a moment to remember one’s strengths and leverage them to make oneself not just attractive but also indispensable to investors,” it further observed.However, the ministry cautioned that private sector capital expenditure could remain subdued due to tighter global financial conditions and lingering uncertainty.On inflation, the outlook appears encouraging. The report pointed to low core inflation and softening food prices. Future inflation risks are expected to be contained due to a strong rabi harvest, expanded summer crop coverage, and sufficient foodgrain reserves.Additionally, the India Meteorological Department’s forecast of above-normal monsoon rainfall and declining global crude oil prices are expected to further ease inflationary pressures.
