India sees near-term risks to economic activity from tariff concerns

India is actively pursuing a diversified trade strategy to sustain its resilient trade performance, it noted.

Fiscal performance during the first quarter (Q1) of fiscal 2025-26 (FY26) reflects a strong capital expenditure push, with robust growth in capital expenditure alongside healthy revenue growth driven primarily by non-tax receipts.

Gross tax revenue rose modestly on a high base, with moderation in direct collection given the tax cuts.

The labour market witnessed positive momentum in July with an improvement in labour force participation and unemployment rate. White-collar hiring increased, accompanied by modest growth in jobs in the services and manufacturing sectors, the review noted. Formal job creation also strengthened.

The government’s recent policy initiatives, including the setting up of a task force for next-generation reforms and the forthcoming goods and services tax (GST) reforms, deregulation initiatives of the states, coupled with the sovereign rating upgrade, are set to reduce borrowing costs, attract foreign capital, and bolster investment and consumption.

If the near-term economic pain is absorbed more by those who have the ability and the financial strength to do so, then small and medium enterprises in downstream industries will emerge stronger from the trade imbroglio, it added.

ALCHEMPro News Desk (DS)