Govt, Private Sector Must Work Together to Minimize Tariff Disruptions: Finance Ministry Review

New Delhi, Aug 27 — India’s Finance Ministry has cautioned that near-term risks to exports and capital formation remain due to tariff-related uncertainties. However, it emphasized that close coordination between the government and the private sector can help contain these disruptions, according to its Monthly Economic Review released on Wednesday.

The report noted that India’s strong macroeconomic fundamentals continue to reinforce the resilience of its economy.

“Setbacks, if managed wisely, make us stronger and more agile. If those with greater financial capacity absorb most of the short-term pain, small and medium enterprises in downstream industries can emerge stronger from the ongoing trade challenges. This is the time to prioritize national interest,” the Monthly Economic Review (July 2025) stated.

Recent policy measures—including the creation of a Task Force for Next-Generation Reforms, upcoming GST reforms, state-level deregulation, and India’s recent sovereign rating upgrade—are expected to reduce borrowing costs, attract foreign investments, and stimulate both consumption and investment.

“These reforms signal the start of a new phase in governance transformation, positioning India as more resilient, inclusive, and globally competitive amid rising global economic self-interest,” the Review highlighted.

The backdrop to these developments includes the US administration’s decision to impose steep 50% tariffs on Indian goods, described in the Review as a form of “economic blackmail.”

Despite this, India has secured a sovereign rating upgrade to ‘BBB’ from S&P, underscoring the country’s resilient growth trajectory, contained inflation, improved fiscal metrics, and stronger public finances.

Business indicators remain upbeat: record e-way bill generation, a 16-month high in PMI manufacturing, and robust services PMI growth all point to healthy economic activity. Strong FMCG sales, UPI transactions, vehicle sales, and favorable monsoon conditions are further fueling both rural and urban demand.

Forward-looking RBI surveys also reflect rising capacity utilization, stable inventories, and broad optimism across manufacturing, services, and infrastructure, reinforcing business confidence.

On the fiscal front, Q1 FY26 saw a strong push in capital expenditure alongside healthy revenue growth, mainly from non-tax receipts. Exports of goods and services grew 4.5% year-on-year in July 2025, led by a 12.7% surge in core merchandise exports.

As of August 8, 2025, India’s foreign exchange reserves stood at $695.1 billion, covering 11.4 months of imports.

In terms of trade strategy, the government has pursued a balanced approach in free trade negotiations, seeking greater market access while protecting domestic industries. The recently concluded India-UK Comprehensive Economic and Trade Agreement (CETA) and the India-EFTA Trade and Economic Partnership Agreement (TEPA) highlight this strategy, with further negotiations underway with other partners.