Risks from ongoing global trade disruptions warrant close monitoring and diversification into various unexplored markets, the finance ministry said in a report on Tuesday. While merchandise exports may face pressure due to global uncertainties, services exports will likely maintain resilience, it said.
“However, global uncertainties, such as trade tensions and geopolitical risks, could disrupt supplies or cause prices to rise or both,” the finance ministry’s economists said in the report.
Nevertheless, while geopolitical uncertainties present challenges for India too, they also offer an opportunity to strengthen its position in international trade and manufacturing by leveraging its comparative advantages in select goods and services, according to the report.
“With renewed and sustained focus on geopolitical developments, India can mitigate these risks and capitalise on emerging opportunities through strategic trade negotiations, domestic reforms and manufacturing investments,” it said.
Recently, the International Monetary Fund (IMF) said the “near-universal” US tariffs, most of which have been paused for 90 days, raised effective tariff rates to levels not seen in a century, on their own, are a major negative shock to world growth. The IMF cut India’s growth projection by 30 basis points (bps) to 6.2% for FY26, citing higher trade tensions and global uncertainty. It also cut its projection for global output growth this year to 2.8%, down from its January forecast of 3.3%.
The finance ministry’s report said this is the time for the private sector to invest in product differentiation and quality as easy pickings recede into history.
“Removal of compliance, inspection and logistics hurdles has assumed far greater urgency than before. Empirical research has shown that China’s exports grew faster in those sectors where import duties on inputs came down the most,” the ministry report said.
With the government’s strong commitment to fiscal consolidation, the availability of domestic savings to finance private sector investment has improved.
“Going forward, the planned reduction of public debt to GDP will create additional domestic resources for private investment, especially as states also work to decrease their debt burdens. As a result, fiscal discipline is expected to enhance the momentum of economic growth,” it said.
With the right strategies in place, continued domestic reforms, and a strong focus on infrastructure development and job creation, the economy can demonstrate resilient growth despite global uncertainties, it said.
