The resilience of India’s external sector has been a key contributor to its stable macroeconomic environment amid a global trade environment shaped by tariff adjustments and increased uncertainty, according to the Finance Ministry’s ‘Monthly Economic Review’, adding that the country has unleashed bold reforms to mitigate the impact of global uncertainties.
Persistent shocks such as uncertainties related to tariffs, geopolitical tensions, and disruptions in supply chains have significantly impacted global trade dynamics. Despite these challenges, global trade has shown some resilience, and India is among those economies.
According to the WTO’s Trade Forecasts, the world’s merchandise trade is projected to grow by 0.9 per cent in 2025, significantly lower than the 2.7 per cent estimate before the tariff increases. It is pertinent to note that the effects of these tariffs are still emerging, and they are expected to have a dampening effect on trade in the latter half of 2025 and throughout 2026.
“Given the importance of the US market for India’s goods exports and the tariff rates that would apply to a significant portion of India’s merchandise exports to the United States, India would face these effects, unless the uncertainty is resolved soon, resulting in lower duties,” the Economic Review noted.
To enhance economic growth amid the challenging global landscape, Prime Minister Narendra Modi has announced a few initiatives focusing on policy reforms. First, the creation of a Task Force for Next-Generation Reforms aims at further simplifying regulations, lowering compliance costs, and fostering a more enabling environment for start-ups, MSMEs, and entrepreneurs.
“Second, the planned rollout of next-generation GST Reforms in the coming months, with an emphasis on reducing the tax burden on essential items, is expected to provide direct relief to households and boost consumption demand. Complementing these measures, the rating upgrade is anticipated to reduce the borrowing costs, attract greater foreign capital inflows, widen the access to global capital markets, boost disposable income, reduce inflationary pressures, cut input costs for businesses, and support growth,” the Economic Review emphasised.
Amid global uncertainties, these government initiatives are charting a growth trajectory driven by long-term reforms that will boost disposable income, reduce inflationary pressures, and reduce costs for businesses.
The deregulation efforts by the states, such as lifting restrictions on women working night shifts and improving the ease of doing business, will further enhance productivity and stimulate economic growth.
The government’s focus on employment generation through schemes like the PM Viksit Bharat Rozgar Yojana, combined with reforms in the education sector and skill development initiatives, aims to create a workforce that is well-prepared for the demands of the changing world, the Finance Ministry’s document read.
