NEW DELHI: India called on Friday for more monetary easing as it flagged risks to economic growth and budget targets, citing a series of disinflationary impulses weighing on Asia’s third-largest economy.
In its mid-year economic survey, the Finance Ministry said “tighter” monetary policy meant real interest rates in India were substantially higher than in comparable emerging economies, further clouding the economic outlook.
Faster monetary easing, the ministry argued, would help deleverage corporate balance sheets and restore banks’ profits, helping the economy realize its full potential.
While it retained an official growth forecast of 6.75 percent to 7.5 percent for the fiscal year to March 2018, the report highlighted a stronger rupee, deepening farm distress and a disruption in business activity following the launch of a new sales tax, as headwinds.
“There has been an across-the-board deceleration,” said chief economic adviser Arvind Subramanian, the survey’s author. “It is less likely than before that we will reach the upper end of the range.”
Growth slowed to 6.1 percent in the March quarter, its lowest in more than two years, following monetary reform ordered by Prime Minister Narendra Modi last November to purge high-value banknotes from circulation.
The subsequent launch of a national Goods and Services Tax (GST) has caused chaos on the ground as ambiguous rules have left firms confused on how to price their products.
In a sign of things to come, business surveys showed both services and manufacturing contracting at their fastest rate in years in July, the month that the GST was launched.
Disinflationary pressures allowed the Reserve Bank of India (RBI) last week to cut its main policy rate — the first easing by an Asian central bank this year — by 25-basis points to 6 percent.
Yet Subramanian, Finance Minister Arun Jaitley’s top economic adviser, said the policy repo rate was still 25-75 basis points above the neutral rate.
Although he did not fault the RBI’s new inflation-targeting framework, he did question the approach of its Monetary Policy Committee.
“Both expected inflation and GDP (gross domestic product) are subdued relative to their equilibrium levels,” the survey said. “The conclusion is inescapable that the scope for monetary easing is considerable.”
Even as the RBI resumed cutting rates, it warned inflation could accelerate to as high as 4.5 percent in October-December. The economic survey, however, took the view that India’s inflation, which cooled to a record low of 1.54 percent in June, is undergoing a “structural shift.”
It expects headline inflation to remain below the RBI’s medium-term target of 4 percent through to the end of March 2018 on the back of normal summer rains and the deflationary impact of farm loan waivers.
Four Indian states including Uttar Pradesh, which has a population bigger than Brazil’s, have agreed to waive billions of dollars in farm loans to offer relief to farmers reeling from losses caused by bad weather.
Subramanian said the loan waivers were likely to be deflationary as the states would have to either raise taxes or cut spending to keep their budget deficits in check.
Indian government flags growth risks and pushes for monetary easing
Indian government flags growth risks and pushes for monetary easing
Gulf-EU value chain integration signals shift toward long-term economic partnership: GCC secretary general
RIYADH: Value chains between the Gulf and Europe are poised to become deeper and more resilient as economic ties shift beyond traditional trade toward long-term industrial and investment integration, according to the secretary general of the Gulf Cooperation Council.
Speaking on the sidelines of the World Governments Summit 2026 in Dubai, Jasem Al-Budaiwi said Gulf-European economic relations are shifting from simple commodity trade toward the joint development of sustainable value chains, reflecting a more strategic and lasting partnership.
His remarks were made during a dialogue session titled “The next investment and trade race,” held with Luigi Di Maio, the EU’s special representative for external affairs.
Al-Budaiwi said relations between the GCC and the EU are among the bloc’s most established partnerships, built on decades of institutional collaboration that began with the signing of the 1988 cooperation agreement.
He noted that the deal laid a solid foundation for political and economic dialogue and opened broad avenues for collaboration in trade, investment, and energy, as well as development and education.
The secretary general added that the partnership has undergone a qualitative shift in recent years, particularly following the adoption of the joint action program for the 2022–2027 period and the convening of the Gulf–European summit in Brussels.
Subsequent ministerial meetings, he said, have focused on implementing agreed outcomes, enhancing trade and investment cooperation, improving market access, and supporting supply chains and sustainable development.
According to Al-Budaiwi, merchandise trade between the two sides has reached around $197 billion, positioning the EU as one of the GCC’s most important trading partners.
He also pointed to the continued growth of European foreign direct investment into Gulf countries, which he said reflects the depth of economic interdependence and rising confidence in the Gulf business environment.
Looking ahead, Al-Budaiwi emphasized that the economic transformation across GCC states, driven by ambitious national visions, is creating broad opportunities for expanded cooperation with Europe.
He highlighted clean energy, green hydrogen, and digital transformation, as well as artificial intelligence, smart infrastructure, and cybersecurity, as priority areas for future partnership.
He added that the success of Gulf-European cooperation should not be measured solely by trade volumes or investment flows, but by its ability to evolve into an integrated model based on trust, risk-sharing, and the joint creation of economic value, contributing to stability and growth in the global economy.
GCC–EU plans to build shared value chains look well-timed as trade policy volatility rises.
In recent weeks, Washington’s renewed push over Greenland has been tied to tariff threats against European countries, prompting the EU to keep a €93 billion ($109.7 billion) retaliation package on standby.
At the same time, tighter US sanctions on Iran are increasing compliance risks for energy and shipping-related finance. Meanwhile, the World Trade Organization and UNCTAD warn that higher tariffs and ongoing uncertainty could weaken trade and investment across both regions in 2026.
