“More than trade, the perception of prolonged uncertainty may cause the private sector to put its capital formation plans on hold,” the ministry said.
To guard against this risk, both companies and policymakers must “act urgently to avoid making uncertainty feed upon itself,” it added.
The review noted that as the world’s fifth-largest economy, India remains vulnerable to spillover effects from geopolitical events, with substantial integration into global trade and financial networks.
However, the domestic economy is large and capital formation can lead to a “mutually reinforcing” cycle of investment-income , growth-demand and additional capacity creation, the ministry said.
“In contrast to normal times, action and execution have greater impacts now. It is an opportunity not to be missed, “ the economy review stated.
It also flagged that the danger of “trade tensions and geopolitical risks, pose upside risks to commodity prices and may put pressure on supply chains”
So while the current outlook for the Indian economy appears positive, supported by fiscal discipline, a resilient financial market, growing consumption demand as some of the key factors — global developments could upset this balance.
(Edited by : Shloka Badkar)
