NEW DELHI: The Finance Ministry on Wednesday said India has to reinvent itself and reimagine its responses to pressing global realities if it has to achieve strategic leverage, given the mounting uncertainties around artificial intelligence and weaponisation of trade.
As external conditions evolve, prudent macroeconomic management and swift policy responses will remain important in shaping India’s economic trajectory, the Monthly Economic Report by the finance ministry said.
Global developments related to AI and weaponisation of supply chains in general are reminders of the distance India needs to travel to achieve long-term resilience and strategic leverage, the report said.
“Swifter policy responses and their implementation are vital to encourage foreign and domestic investment in the Indian economy. Recent years have been a time for hunkering down and battening down the hatches. Coming years will be no exception,” the report cautioned.
The assessment reflects policy makers’ concerns around the disruption to trade due to the aggressive tariff policies of the US and to labour markets from AI.
The review follows Prime Minister Narendra Modi’s meeting with top economic ministry officials on Tuesday where he stressed the need to reform processes, improve work culture and strengthen institutional efficiency, emphasising that reforms are not merely a fashionable term but a continuous necessity for effective governance.
The finance ministry’s report said that despite heightened global uncertainties, India’s economic outlook remains underpinned by resilient domestic fundamentals, continued policy support, and strengthening structural drivers of growth. “However, upside risk to inflation, fiscal and current account deficits and downside risk to growth remain in the wake of persistent stand-off in the Gulf region,” it reckoned.
The report said while risks are more balanced than in the April World Economic Outlook report by the International Monetary Fund, they remain tilted to the downside, with renewed conflict in the Middle East, trade fragmentation, a correction in technology-driven expectations and limited policy buffers posing key risks to global growth.
The report attributed the sustained growth momentum of the Indian economy to structural reforms of the last decade and infrastructure investments, though some high-frequency indicators such as growth in e-way bill generation softened in June.
“Looking ahead, resilient domestic demand is expected to continue supporting economic activity, although renewed geopolitical tensions and commodity price volatility remain key risks to the outlook,” it added.
The Reserve Bank of India has forecast 6.6 per cent growth for FY27, with downside risks.
The finance ministry said while global crude price fluctuations from geopolitical events and potential El Niño weather patterns are being carefully monitored, the domestic inflation outlook remains cautious and structurally well-supported, anchored by active measures to support price stability, robust agricultural commodity procurement and targeted contingency plans in place.
“Nevertheless, the recent resurgence in global crude oil prices, if sustained, could re-emerge as a source of pressure on financing of both the fiscal deficit and the current account balance,” it added.
Source: Business Standard
