The government’s measures could boost GDP forecasts of 6.3% to 6.8% 

FPJ News Service mumbai

A successful US-India trade agreement could flip current headwinds into tailwinds, opening up new market access and energising exports, a report released by the Ministry of Finance said on Tuesday.

The imposition of reciprocal tariffs by the US, particularly a 26% tariff on Indian imports effective April 2025, has injected uncertainty into India’s export outlook. Although a 90-day suspension of new tariffs is in place pending bilateral negotiations, the risk of renewed trade barriers remains a key external vulnerability. Private sector capital expenditure could lag behind, with firms adopting a more cautious stance amid global uncertainty and tighter financial conditions.

“However, global uncertainties remain. The outcome of a pause in the US-China reciprocal tariffs will be important. Further, the passage of the US Budget Bill for the next financial year and the reaction in the US bond market, in light of the recent downgrade of the US sovereign credit rating by Moody’s, will also set the tone for financial markets globally in the final months of 2025,”  the ministry said in its Monthly Economic Review report for April.

India’s economy as of April 2025 is characterised by robust domestic fundamentals, prudent macroeconomic management, and a capacity to withstand external shocks. Strong private consumption, especially the rural rebound, and robust services exports remain the primary engines of growth. The services sector continues to post healthy expansion, offsetting some of the softness in merchandise exports.

The Indian rupee has remained relatively stable, and foreign exchange reserves continue to provide a cushion against external shocks. Government capital expenditure has played a pivotal role in supporting economic activity, providing a buffer against external shocks.

The government’s direct tax exemptions and fiscal measures, along with the rate cuts from the RBI, are expected to further stimulate consumption and investment. These could accelerate the recovery and lift growth towards the upper end of forecasts of 6.3% to 6.8%, given in the latest Economic Survey.

India has the potential to remain as one of the most promising destinations for investment, amid global uncertainty. Foreign direct investors are likely to respond positively to policies that strengthen the country’s medium-term growth prospects. The inflation outlook remains optimistic, supported by low core inflation and a decline in food prices.