NEW DELHI: The finance ministry on Wednesday said that swifter policy responses and their implementation are critical to encourage foreign and domestic investment in the economy and underlined the need for reimagining responses to deal with global challenges.“There is no doubt that the economy has continued to demonstrate resilience amid a challenging global backdrop. Nonetheless, global challenges show no sign of letting up, with uncertainties mounting. So, India has to reinvent itself and reimagine its responses to global imperatives if it has to achieve strategic leverage. As external conditions evolve, the continued interplay of domestic reforms, prudent macroeconomic management and swift policy responses, backed by consistent on-ground implementation will remain important in shaping India’s economic trajectory,” the latest monthly economic report said.
It flagged the recent resurgence in global crude oil prices as a potential “source of pressure” on financing both the fiscal deficit and the current account balance, if it sustained, but asserted that the economic outlook remains underpinned by resilient domestic fundamentals, continued policy support and strengthening structural drivers of growth.The review recognised upside risk to inflation, fiscal and current account deficits and downside risk to growth remain in the wake of persistent stand-off in West Asia.“Global developments related to AI and weaponisation of supply chains in general are reminders of the distance India needs to travel to achieve long-term resilience and strategic leverage. Swifter policy responses and their implementation are vital to encourage foreign and domestic investment in the Indian economy,” the report said.Regarding the external sector, the review said it has exhibited “notable resilience” as strong export performance, services trade surplus, and consistent remittance flows have strengthened the current account and added that recent policy measures will provide an impetus to capital inflows in near term.“Together with adequate foreign exchange reserves, these factors are expected to reinforce the external sector’s resilience.”It also flagged a potential El Nino transition as a risk, warning that adverse weather could hurt farm output, stoke food inflation and dampen rural demand.
