Global Uncertainty: A Key Risk to India's Growth

NEW DELHI: The finance ministry's monthly economic report highlighted on Tuesday that uncertainty from global developments is a major risk to India's growth outlook for FY26. The report warns that prolonged uncertainty could lead the private sector to delay capital formation plans, more than trade itself.

Call for Urgent Action

The report emphasizes the need for the private sector and policymakers to act swiftly to prevent uncertainty from becoming self-perpetuating. It suggests that capital formation could initiate a cycle of investment-income growth-demand growth-additional capacity creation, highlighting the importance of action and execution in these times.

India's Growth Drivers

Despite global challenges, India's long-term growth is supported by macroeconomic stability, a resilient external sector, declining fiscal deficit, easing inflation, improving employment prospects, and high consumption expenditure. The report underscores the critical role of private capital formation in sustaining this positive trend and calls for public policy and regulatory measures to facilitate private sector participation.

Multilateral Agencies' Projections

Several multilateral agencies, including the IMF and World Bank, have adjusted India's growth projections downward, citing the impact of global trade and geopolitical tensions. The report stresses the importance of nurturing a domestic policy and regulatory environment conducive to capital formation, hiring, and output growth amidst global turbulence.