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
India and US release a framework for an interim trade agreement to reduce Trump tariffs
NEW DELHI: India and the United States released a framework for an interim trade agreement to lower tariffs on Indian goods, which Indian opposition accused of favoring Washington.
The joint statement, released Friday, came after US President Donald Trump announced his plan last week to reduce import tariffs on the South Asian country, six months after imposing steep taxes to press New Delhi to cut its reliance on cheap Russian crude.
Under the deal, tariffs on goods from India would be lowered to 18 percent, from 25 percent, after Indian Prime Minister Narendra Modi agreed to stop buying Russian oil, Trump had said.
The two countries called the agreement “reciprocal and mutually beneficial” and expressed commitment to work toward a broader trade deal that “will include additional market access commitments and support more resilient supply chains.” The framework said that more negotiations will be needed to formalize the agreement.
India would also “eliminate or reduce tariffs” on all US industrial goods and a wide range of food and agricultural products, Friday’s statement said.
The US president had said that India would start to reduce its import taxes on US goods to zero and buy $500 billion worth of American products over five years, part of the Trump administration’s bid to seek greater market access and zero tariffs on almost all American exports.
Trump also signed an executive order on Friday to revoke a separate 25 percent tariff on Indian goods he imposed last year.
Indian Prime Minister Narendra Modi thanked Trump “for his personal commitment to robust ties.”
“This framework reflects the growing depth, trust and dynamism of our partnership,” Modi said on social media, adding it will “further deepen investment and technology partnerships between us.”
India’s opposition political parties have largely criticized the deal, saying it heavily favors the US and negatively impacts sensitive sectors such as agriculture. In the past, New Delhi had opposed tariffs on sectors such as agriculture and dairy, which employ the bulk of the country’s population.
Meanwhile, Piyush Goyal, Indian Trade Minister, said the deal protects “sensitive agricultural and dairy products” including maize, wheat, rice, ethanol, tobacco, and some vegetables.
“This (agreement) will open a $30 trillion market for Indian exporters,” Goyal said in a social media post, referring to the US annual GDP. He said the increase in exports was likely to create hundreds of thousands of new job opportunities.
Goyal also said tariffs will go down to zero on a wide range of Indian goods exported to the US, including generic pharmaceuticals, gems and diamonds, and aircraft parts, further enhancing the country’s export competitiveness.
India and the European Union recently reached a free trade agreement that could affect as many as 2 billion people after nearly two decades of negotiations. That deal would enable free trade on almost all goods between the EU’s 27 members and India, covering everything from textiles to medicines, and bringing down high import taxes for European wine and cars.
India also signed a comprehensive economic partnership agreement with Oman in December and concluded talks for a free trade deal with New Zealand.
The joint statement, released Friday, came after US President Donald Trump announced his plan last week to reduce import tariffs on the South Asian country, six months after imposing steep taxes to press New Delhi to cut its reliance on cheap Russian crude.
Under the deal, tariffs on goods from India would be lowered to 18 percent, from 25 percent, after Indian Prime Minister Narendra Modi agreed to stop buying Russian oil, Trump had said.
The two countries called the agreement “reciprocal and mutually beneficial” and expressed commitment to work toward a broader trade deal that “will include additional market access commitments and support more resilient supply chains.” The framework said that more negotiations will be needed to formalize the agreement.
India would also “eliminate or reduce tariffs” on all US industrial goods and a wide range of food and agricultural products, Friday’s statement said.
The US president had said that India would start to reduce its import taxes on US goods to zero and buy $500 billion worth of American products over five years, part of the Trump administration’s bid to seek greater market access and zero tariffs on almost all American exports.
Trump also signed an executive order on Friday to revoke a separate 25 percent tariff on Indian goods he imposed last year.
Indian Prime Minister Narendra Modi thanked Trump “for his personal commitment to robust ties.”
“This framework reflects the growing depth, trust and dynamism of our partnership,” Modi said on social media, adding it will “further deepen investment and technology partnerships between us.”
India’s opposition political parties have largely criticized the deal, saying it heavily favors the US and negatively impacts sensitive sectors such as agriculture. In the past, New Delhi had opposed tariffs on sectors such as agriculture and dairy, which employ the bulk of the country’s population.
Meanwhile, Piyush Goyal, Indian Trade Minister, said the deal protects “sensitive agricultural and dairy products” including maize, wheat, rice, ethanol, tobacco, and some vegetables.
“This (agreement) will open a $30 trillion market for Indian exporters,” Goyal said in a social media post, referring to the US annual GDP. He said the increase in exports was likely to create hundreds of thousands of new job opportunities.
Goyal also said tariffs will go down to zero on a wide range of Indian goods exported to the US, including generic pharmaceuticals, gems and diamonds, and aircraft parts, further enhancing the country’s export competitiveness.
India and the European Union recently reached a free trade agreement that could affect as many as 2 billion people after nearly two decades of negotiations. That deal would enable free trade on almost all goods between the EU’s 27 members and India, covering everything from textiles to medicines, and bringing down high import taxes for European wine and cars.
India also signed a comprehensive economic partnership agreement with Oman in December and concluded talks for a free trade deal with New Zealand.
Latest updates
© 2026 SAUDI RESEARCH & PUBLISHING COMPANY, All Rights Reserved And subject to Terms of Use Agreement.