Festive demand, tax soups to increase growth; US tariff impact may not be significant: the most important economic adviser of India

New -Delhi: Domestic demand for goods and services will be further strengthened in the coming quarters due to the festive season, lower inflation and the government’s tax relief measures, the chief economic adviser V. Anantha offsee on Friday. He also said that although US additional rates on Indian goods pose the risks to domestic economic activities, it may not be significant in the light of continued discussions for a bilateral trade agreement and the adaptability and resilience of Indian enterprises. Given a strong achievement in the first quarter and how Indian industries adjust to cushion the effects of the rates, the Ministry of Finance does not review the 6.3-6.8% (GDP) growth forecast for 2025-26, offspring said during a briefing. The economy of India has exceeded expectations to grow by 7.8% in the June term, the fastest extension in five quarters, aided by strong growth in the agriculture, manufacturing, construction and services sector. ‘The part of private final consumption spending in GDP rose to 60.3% in the June quarter, the highest level of the first quarter in 15 years,’ said an official of the finance ministry. “The government’s capital expenditure has also maintained the momentum in the growth of gross fixed capital formation.” Estimates ranging from 0.2% to a 1% impact on GDP growth of India due to US rates are very uncertain, offspring said. “And therefore, at this stage, although we must acknowledge the disadvantage risk, I think that it is not necessary to expect it to be of a very important nature.” He added that high-frequency indicators such as e-way bills (permits for electronic goods), indicating the build-up of stock and higher gasoline and diesel consumption, indicated that the economic momentum indicated in June quarter. Higher Kharif or monsoon crop is expected to sow, supported by above-average rainfall, comfortable buffer supplies and a better output prospects for agriculture, which will keep the food inflation benign, he added. Exporters are looking at the tariff uncertainty as an opportunity to explore new markets that are now open due to different trade transactions, the Chief Economic Advisor said. “It is clear that there is some uncertainty about the duration of the period for which the additional rate is related to the purchase of Russian crude oil, but there is an expectation that we will see a resolution in the non-so-far future,” offspring said. He added that it was challenging to give exact estimates of the US tariff’s impact on GDP growth, but the consequences are expected to be short-lived. However, there will be a risk of growth if the tariffs remain for a longer period, he added. “We are hopeful that it would be resolved rather than later.” Referring to the government’s tax rationalization measures and the simplification of procedures announced by Prime Minister Narendra Modi in its Independence Day speech, Eseswaran said the country uses trade uncertainty as an opportunity to move forward. “It is an opportunity for exporters to increase the competitiveness of their products and also explore other markets. Thus collectively between the public and the private sector initiatives, we can transform this situation into one of long-term strengths and opportunities,” he said. The income tax relief announced in the budget, low inflation and the proposed review of the GST rate would mean more disposable income in the hands of people than during last year, which increases the demand for goods and services, he explained. Eseswaran also said that, despite the challenges during the Covid period, the government remained faithful to the path of fiscal caution and the fiscal deficit of India gradually decreased. He also described India’s sovereign rating upgrade by S&P as a well-deserved recognition of robust macro performance.