A successful bilateral trade agreement between the US and India could transform current challenges into opportunities, potentially opening up new markets and boosting exports, according to a report from the Ministry of Finance on Tuesday.
The two countries are reportedly close to finalising an interim trade agreement before July 8, with India pushing for a full exemption from the reciprocal tariff.
The US had imposed a 26% reciprocal tariff on Indian goods on April 2, though it suspended the tariff for 90 days until July 9. However, the existing 10% baseline tariff from the US remains in effect.
“A successful US-India trade agreement could flip current headwinds into tailwinds... The risk of renewed trade barriers remains a key external vulnerability," the report said.
The report also highlighted India's potential to remain an attractive investment destination amidst global economic uncertainty.
The Monthly Economic Review, released by the finance ministry, indicated that foreign direct investors are likely to react favourably to policies that bolster the country's medium-term growth prospects.
In particular, it said, policies that enhance the skills and productivity of the country's young workforce can significantly strengthen the virtuous cycle of investment and growth.
The report said India continues to be the fastest growing major economy and faced the least amount of cut amongst other global economies as projected by various global agencies.
As per the IMF's World Economic Outlook (April 2025), India's real GDP growth for 2025-26 is pegged at 6.2%, 30 basis points lower than its previous forecast in January 2025. These revisions are on account of higher levels of global uncertainties and trade tensions.
Multiple agencies project India's growth at 6.3-6.7% in FY26, supported by robust domestic fundamentals, stable macroeconomic management, and growing government capital expenditure, while declining inflation strengthens this outlook, it said.
As per the report, India's economy as of April 2025 is characterised by robust domestic fundamentals, prudent macroeconomic management, and a capacity to withstand external shocks.
Strong private consumption, especially the rural rebound, and robust services exports remain the primary engines of growth.
(With PTI inputs)
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