India-US trade treaty to energise exports: Finance ministry

NEW DELHI: A successful US-India trade agreement could transform current headwinds into tailwinds, opening up new markets and energising exports, a finance ministry report said on Tuesday. However, it cautioned that global uncertainties remain.

India and the US are engaged in talks to finalise a deal, with indications that the first phase is likely before July. The finance ministry's monthly report for April stated that the imposition of reciprocal tariffs by the US, particularly a 26% tariff on Indian imports effective April, has injected uncertainty into India's export outlook. Although a 90-day suspension of new tariffs is in place pending bilateral negotiations, the risk of renewed trade barriers remains a key external vulnerability.

The report also noted that private sector capital expenditure could lag, with firms adopting a more cautious stance amid global uncertainty and tighter financial conditions. It highlighted that India has the potential to remain one of the most promising destinations for investment, despite global uncertainty.

"Foreign direct investors are likely to respond positively to policies that strengthen the country's medium-term growth prospects. In particular, policies that enhance the skills and productivity of the country's young workforce can significantly strengthen the virtuous cycle of investment and growth," the report stated.

As of April, India remains the fastest-growing major economy despite a revision of growth rates amid rising global uncertainties and trade tensions. Multiple agencies have projected India's growth to be in the range of 6.3-6.7% in FY26, supported by robust domestic fundamentals, stable macroeconomic management, and growing govt capital expenditure, while declining inflation strengthens this outlook.

The report indicated that the outlook for food inflation is expected to remain benign due to a good rabi crop harvest, an increase in the area sown under summer crops, and healthy procurement of foodgrains. It mentioned that the forecast of an above-normal monsoon by the weather office bolsters this outlook.

"The inflation outlook remains optimistic, supported by low core inflation and a decline in food prices. Going forward, inflationary pressures stemming from food items are expected to remain low due to a good rabi harvest, an increase in the area sown under summer crops, and healthy buffer stocks of foodgrains.

"Recent RBI surveys indicate a decline in inflation expectations, adding to the overall positive sentiment. Amidst the declining inflation rate, the monetary policy setting is conducive for fostering economic growth," the report said, hinting at further easing of interest rates in the months ahead.


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