Business EconomyPosted at: Oct 2 2026 12:01PM


India must keep growth momentum, focus on competition-friendly economy: Finance Ministry

New Delhi, Oct 2 (UNI) India cannot afford to become complacent about its strong economic growth as geopolitical tensions and global financial uncertainty intensify, the Finance Ministry said in its latest Monthly Economic Review (MER), calling for faster, consistent and high-quality policy decisions to maintain investor confidence.
The review said India needs to move beyond being merely “business-friendly” and build an economy that encourages greater competition. According to the Department of Economic Affairs officials who authored the review, stronger competition would be critical to creating an economy capable of delivering higher innovation and manufacturing growth.
The ministry also highlighted the importance of better governance and stronger state capacity in improving India's competitive environment. Consistent and predictable policy decisions, it said, would help reassure investors at a time when global economic conditions remain uncertain.
The warning comes amid greater caution among foreign investors toward Indian equities. Rising global bond yields, tariff-related uncertainty and concerns around India's positioning in artificial intelligence have contributed to pressure on foreign portfolio flows.
Despite these challenges, the Finance Ministry expects India's economic expansion to remain strong. It has projected real GDP growth of 7.3 per cent for the September quarter of FY27, following a 7.8 per cent expansion in the June quarter.
The review said economic activity has continued to hold up in the early part of the second quarter, although the pace of expansion could moderate. It stressed that India's post-pandemic growth performance cannot be taken for granted and will need to be sustained through continued policy action.
Agriculture and rural demand could provide additional support to the economy, the ministry said. Monsoon conditions have been more favourable than initially expected, while kharif sowing remains broadly close to last year's levels across several crops.
However, the outlook for the rabi season will need to be monitored, particularly in view of evolving weather conditions.
The ministry also flagged risks to growth from inflation and global monetary conditions. Higher interest rates in developed economies could push up domestic bond yields and reduce the attractiveness of emerging-market assets, potentially slowing cross-border capital flows.
Inflation risks could also increase because of a combination of climate-related disruptions, geopolitical tensions and higher crude oil prices. The review pointed to the possibility of a strong El Niño affecting the upcoming rabi crop through higher temperatures and lower soil moisture. A favourable Indian Ocean Dipole, however, could provide some offset.
Higher global crude prices could add to India's imported inflation pressures, particularly against the backdrop of tighter monetary conditions globally.
The US Federal Reserve's 25-basis-point rate increase in September was also cited among the factors that could influence domestic financial conditions.
At the same time, the Reserve Bank of India's recent liquidity management operations could help keep financial conditions balanced and prevent excessive demand-side pressures, the review said. Festive-season demand and elevated input costs may create temporary price pressures, while government measures on the supply side could help contain their impact.
On the external sector, the Finance Ministry highlighted the continued strength of India's goods and services exports.
At the current pace, exports during the first five months of the financial year are close to USD 400 billion, putting the country on course to potentially approach the USD 1 trillion mark in total exports for the full year.
The review attributed part of the export momentum to India's expanding network of trade agreements and said additional agreements could provide further support to India's external trade.
Overall, the ministry said sustaining high growth will depend on maintaining macroeconomic stability, strengthening economic resilience and improving the quality of policymaking. For India, the challenge now is not simply achieving high growth, but ensuring that the momentum is sustained quarter after quarter amid an increasingly uncertain global environment. UNI VK SAS
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Tags: #India must keep growth momentum# focus on competition-friendly economy: Finance Ministry
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