Financial system to develop at 6.5% in FY26 regardless of international tensions, commerce uncertainties, says EAC-PM chairman Mahendra Dev

The Indian economic system is anticipated to develop at 6.5% within the present monetary 12 months, regardless of geo-political tensions and commerce coverage uncertainties, Financial Advisory Council to the Prime Minister (EAC-PM) Chairman S Mahendra Dev stated on Tuesday (July 15, 2025).

In an interview with PTI, Mr. Dev additional stated that home development will probably be pushed by low inflation, ensuing from good monsoon and benign rate of interest regime, triggered by three back-to-back price cuts by the Reserve Financial institution of India.

“There are vital international headwinds like the dual shocks of geo-political tensions and commerce coverage uncertainties.

“Nonetheless, the Indian economic system is resilient and continues to be the quickest rising nation amongst giant economies,” the eminent economist stated.

In line with Mr. Dev, high-frequency indicators for the primary two months of 2025-26 point out resilient efficiency of the home economic system.

“A 6.5% of GDP development for FY26 is possible regardless of international uncertainties. India’s medium-term development prospects appear to be strong with sound fiscal administration,” he stated.

Dev additionally emphasised that rising authorities capital expenditure can have optimistic impression on development with a wholesome growth in personal consumption. The Worldwide Financial Fund (IMF) and the World Financial institution have slashed India’s development projections for 2025-26 to six.2% and 6.3%, respectively, citing unsure international atmosphere and excessive commerce tensions.

The Indian economic system is estimated to have grown at 6.5% within the earlier fiscal 12 months.

As per the Reserve Financial institution of India’s projections, the nation’s economic system will increase on the similar price within the present fiscal 12 months as effectively.

Mr. Dev stated there are lots of home tailwinds equivalent to low inflation, price cuts, and money reserve ratio (CRR) reduce by the RBI, anticipated good monsoon, measures within the final Price range like rising capital expenditure, tax discount, and so on.

“These tailwinds could increase each rural and concrete demand by elevating each funding, consumption and a few push to exports,” he stated, including that on the provision aspect, agriculture and providers are doing effectively and the expansion of producing will enhance through the years.

Responding to a query on inflation, Mr. Dev stated with a superb monsoon, meals inflation must be below management this 12 months.

“Projections present continued moderation within the costs of many commodities, together with crude oil.

“After all, now we have to be watchful concerning the geopolitical uncertainties and tariff-related tensions, which may increase commodity costs,” he stated.

CPI headline inflation was 2.10 per cent in June 2025 and it’s the lowest year-on-year inflation after January 2019. Crude oil costs are presently below management.

Meals inflation in June 2025 was -1.06%. Assuming a standard monsoon, RBI projected inflation at 3.7% for FY26.

Responding to a query on surge in internet outward international direct funding (FDI), Mr. Dev identified that the World Funding report 2025 exhibits that international FDI inflows grew a marginal 3.7% in gross FDI to $1,509 billion in 2024.

“That is a lot decrease than the worldwide FDI inflows that had peaked 9 years in the past at $ 2,219 billion in 2015,” he stated.

In different phrases, Dev stated international FDI itself is rising slowly.

Noting that India’s FDI inflows have elevated 14% in FY25 — though there was a moderation in internet FDI — he stated it’s identified that there was internet outward FDI and an increase in repatriation.

“Exits and repatriation are a part of the method and signifies an indication of a mature market. Except you allow exit, the nation cannot appeal to funding,” the EAC-PM chairman stated.

He identified that it could be famous that non-resident deposits and exterior business borrowings (ECBs) recorded larger internet inflows in FY 25 in comparison with FY24.

“Increased gross FDI additionally signifies that India continues to stay a sexy funding vacation spot,” Mr. Dev stated.

Referring to the federal government’s push for public capital expenditure, Dev stated rising authorities capex can even have impression on personal sector funding as research have proven that creation of nationwide highways and rural roads have elevated companies in rural and concrete areas.

“In different phrases, authorities capex can have multiplier results. There are some inexperienced shoots on personal capex,” he asserted.

Stating that many state governments are additionally attracting home and international personal funding, he stated the company sector and banks are incomes extra earnings now and their steadiness sheets are in fine condition.

“So, there is no such thing as a downside of capital availability. Trade is optimistic about India’s development story,” Mr. Dev stated.

Whereas the company sector might be holding funding in capability growth attributable to international uncertainties and overcapacity in some international locations like China, enhance in rural and concrete demand will facilitate extra personal funding, he stated.

“Many corporations turned debt free and doubled their money on the books. India Inc has to make new investments as a substitute of preserving the money,” the EAC-PM stated.

Citing Financial Survey 2024-25, which had argued for deregulation and easing “compliance burden”, he stated there’s a want for extra progress on “ease of doing enterprise” on the state degree.

“Hopefully, personal capex will probably be extra as soon as the home demand will increase additional and international uncertainties are decreased,” Dev stated, including that when the tariff issues are over, there will probably be extra alternative for Indian trade to take a position.

Revealed – July 15, 2025 04:24 pm IST