Reciprocal tariffs, global uncertainty cast shadow, but outlook remains positive
A timely and successful trade agreement between India and the United States could provide much-needed momentum to Indian exports and open up new market opportunities, the finance ministry stated in its April monthly report released Tuesday. However, the ministry also flagged global headwinds and ongoing tariff uncertainties as critical risks, reported timesofindia.indiatimes.com.
90-day tariff suspension offers window for deal as talks continue ahead of july deadline. India and the US are currently negotiating a trade pact, with indications that a preliminary deal may be signed before July.
-
The report noted that a 26% reciprocal tariff on Indian imports imposed by the US in April has created fresh uncertainty in the export sector
-
While a 90-day suspension of the new tariff regime is in effect during negotiations, the risk of renewed trade restrictions remains
The report warned that these trade uncertainties could lead private sector firms to delay capital investments amid tighter financial conditions globally. Despite this, India remains among the fastest-growing major economies, with projected growth between 6.3% and 6.7% in FY26, supported by sound macroeconomic management and increased public investment.
The ministry emphasised that foreign direct investors would respond positively to long-term reforms that improve productivity and skills among India’s youth, thereby sustaining a virtuous cycle of growth and investment.
On inflation, the report provided a positive outlook. A good rabi harvest, expanded summer crop area, and robust foodgrain procurement are expected to keep food inflation in check. An above-normal monsoon forecast by the weather department further supports this benign inflation scenario.
The ministry added that RBI surveys show declining inflation expectations, reinforcing the case for a pro-growth monetary policy stance. This could lead to interest rate easing in the months ahead, creating a favourable environment for investment and consumption.