India’s economy has shown resilience in the face of global trade disruptions and fiscal challenges, supported by strong domestic consumption and government spending, according to a report by SBI Capital Markets.
The report noted that while aggressive tariff regimes, particularly by the United States, have emerged as a global concern, India remained relatively insulated in the first quarter, recording GDP growth of 7.8 per cent.
It added that ongoing reforms, including the simplified GST structure expected to release about Rs 50,000 crore into the economy, would provide further impetus to domestic consumption.
The study observed that Indian exporters are facing pressure from reciprocal tariffs, some reaching as high as 50 per cent, including a 25 per cent tariff linked to Russian crude purchases. These measures have added to cost burdens and created uncertainty in trade flows.
Despite a weaker US dollar, the Indian rupee fell by nearly 5 per cent year-on-year, marking a record low. The Reserve Bank of India has limited its intervention, allowing currency depreciation to aid exports while preserving foreign exchange reserves.
On the external front, capital flows remain subdued, but the current account position is assessed as manageable despite weaker merchandise exports.
The report further highlighted that fiscal stress in advanced economies such as the US and UK is complicating the global trade environment, with rising debt levels leading to steeper bond yield curves. In contrast, in India, elevated state government borrowing continues to weigh on long-term yields.
According to the analysis, weaker US job data has also increased the likelihood of a rate cut by the Federal Reserve in its upcoming policy review.
– IANS