Amid global shocks, govt to use fiscal, monetary support to bolster economy

The union finance ministry today said three factors – supportive fiscal measures, accommodative monetary policy, and budget measures - will “bolster domestic economic resilience” amid significant global uncertainties.

“Geopolitical tensions, trade policy uncertainties, volatility in international commodity prices and financial market uncertainties pose considerable risks to the economic growth outlook, globally and locally. One offsetting positive is the outlook for commodity prices,” the ministry said in the monthly economic review for February released today.  

“Domestic private sector capital formation, focused on India’s solid fundamentals and economic prospects, will be an important driver of economic growth in FY26. Supportive fiscal measures, accommodative monetary policy, and the union budget’s focus on longer-term development drivers and reform will bolster domestic economic resilience amidst significant global uncertainties,” said the report.

The review acknowledged the fact that owing to “uncertainty in the policy environment”, global trade continues to be affected. “The Global Trade Policy Uncertainty Index rose to a record high of 237.4 in Q4 2024. Tariff-related developments in multiple countries have heightened trade-related risks, affecting investment and trade flows globally,” it said.  

“Consequently, India’s exports have recorded softer growth thus far in FY25. However, a robust services trade surplus continues to offset the impact of lower growth in merchandise exports,” it said.  

“Within the capital account, gross FDI inflows were higher on a YoY basis. However, net FDI is significantly lower in FY25 due to a rise in repatriation and outbound FDI. Despite the sell-off by FPIs and heightened global market turbulence, the Rupee continues to be amongst the least volatile currencies as compared to its peers,” it added.