Govt, Private Sector Can Keep Tariff Disruptions to a Minimum: FinMin Economic Review

Image via IANS

---

India Faces Tariff Turbulence but Economy Shows Resilience

New Delhi, Aug 27 (TTP): Amid escalating trade frictions and tariff uncertainties, the Finance Ministry’s Monthly Economic Review (July 2025) has said that both the government and private sector must act in tandem to keep disruptions to a minimum.

The review highlighted that while near-term risks to exports and capital formation persist, India’s robust macroeconomic fundamentals will continue to support growth and resilience.

“Setbacks eventually make us stronger and more agile, if handled properly. 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. Now is the time to demonstrate an understanding of national interest,” the Review noted.

US Tariffs: A Major Near-Term Headwind

The remarks come in the wake of the United States imposing a steep 50% tariff on Indian goods, a move that has been widely described as “economic blackmail” by trade observers.

While the measure threatens to hurt India’s merchandise exports, the Finance Ministry stressed that coordinated action between the public and private sectors can limit long-term damage and cushion vulnerable industries.

Reform Push to Offset Global Headwinds

The government has recently rolled out several policy initiatives to strengthen the economy and attract capital flows:

• Task Force for Next-Generation Reforms to modernize governance.
• Forthcoming GST reforms aimed at widening compliance and easing burdens on SMEs.
• State-level deregulation initiatives to reduce red tape.
• S&P sovereign rating upgrade to ‘BBB’, reducing borrowing costs and boosting investor confidence.

“These reforms mark the beginning of an accelerated phase of governance transformation, ensuring that India extends its own line of progress, becoming more resilient, inclusive, and globally competitive in an era of rising global economic self-interest,” the Review stated.

Rating Upgrade Reflects Strong Fundamentals

India’s sovereign rating upgrade by S&P underscores the resilience of its macroeconomic framework.

According to the Finance Ministry:

• Growth has remained steady despite global shocks.
• Inflation expectations are anchored.
• Fiscal consolidation and better quality of government spending have improved credit metrics.

“Building on the momentum of Q1 FY26, the Indian economy continues to reflect resilience in July 2025,” the report added.

Key Growth Indicators Remain Strong

The Review pointed to record e-way bill generation and a 16-month high in PMI manufacturing, reflecting robust activity in industry and logistics. Services growth also remained upbeat with a strong Services PMI.

Domestic demand was buoyed by:

• Rising FMCG sales.
• Surging UPI transactions.
• Vehicle sales supported by strong rural consumption, strengthening urban demand, and a favorable monsoon.

The RBI’s forward-looking surveys confirmed rising capacity utilization, stable inventories, and optimistic expectations across manufacturing, services, and infrastructure.

Fiscal Strength and Export Growth

Fiscal data for Q1 FY26 revealed:

• Strong capital expenditure push by the government.
• Healthy revenue growth, driven largely by non-tax receipts.

Exports also picked up in July 2025, with total exports of goods and services recording 4.5% YoY growth, led by 12.7% growth in core merchandise exports.

Forex Cushion and Trade Strategy

As of August 8, 2025, India’s foreign exchange reserves stood at a comfortable $695.1 billion, providing 11.4 months of import cover.

To manage the evolving global trade environment, India is pursuing a calibrated Free Trade Agreement (FTA) strategy:

• India-UK Comprehensive Economic and Trade Agreement (CETA) concluded.
• India-EFTA Trade and Economic Partnership Agreement (TEPA) signed.
• Ongoing negotiations with several other countries.

This approach aims to expand market access while protecting domestic industries.

Impact on Economy and Society

The Finance Ministry acknowledged that tariff shocks disproportionately impact small businesses in supply chains. However, with targeted support and shared responsibility between government and industry leaders, SMEs could emerge stronger.

Analysts say India’s focus on structural reforms, digital adoption, and sustainable fiscal policy may help absorb near-term shocks while positioning the country as a long-term global investment hub.

Final Thoughts – TheTrendingPeople.com

The Finance Ministry’s review makes one thing clear: tariffs may bruise India’s economy, but they won’t break it. The government’s reform agenda, paired with private sector resilience, provides a strong cushion against external shocks.

The sovereign rating upgrade signals global confidence in India’s fundamentals, while expanding FTAs highlight a proactive strategy in an era of rising protectionism.

The real test, however, will be how effectively India shields its SMEs and vulnerable industries in the coming months. If both the government and industry leaders step up, India can turn this trade challenge into an opportunity for deeper economic transformation.