By Manoj Kumar and Nikunj Ohri
NEW DELHI, Jan 30 (Reuters) - India's growth outlook faces potential downside risks from global macroeconomic uncertainty and prolonged financial market corrections, the country's
chief economic adviser said days before the federal budget, with the economy on track to grow above 7% this fiscal year.
The finance ministry's economic survey, a report on the state of the economy presented in parliament on Thursday, projected growth in a range of 6.8% to 7.2% for the next fiscal year, and raised the economy's medium-term potential to about 7% from 6.5%, citing reforms and public investment.
Finance Minister Nirmala Sitharaman will present the budget for 2026-27 on Sunday amid expectations New Delhi will seek to bolster fast economic growth and buffer the Asian nation from external shocks through policy reforms.
"If global financial markets and the political situation do not deteriorate to the extent that sentiment gets affected in financial markets and in the business community, then I think the upper end is well within reach,” V. Anantha Nageswaran said in an interview with Reuters on Friday, referring to the growth projections.
He cautioned, however, that significant and prolonged financial market corrections or geopolitical developments that impede the movement of commodities and affect global supply chains could drag growth towards the lower end of the range.
Indian equity benchmarks logged their steepest monthly fall in nearly a year in January as lingering uncertainty over the India-U.S. trade pact triggered sustained foreign selling. The rupee slipped to a record low, capping its worst month in over three years.
TRADE PACT ADVANTAGE
Nageswaran said easing uncertainty around trade tensions would support investment.
A resolution of tariff issues with the U.S., he said, would “add to a sense of relief, and therefore willingness to commit more investments on the ground by Indian and foreign businesses.”
President Donald Trump slapped a 50% tariff on some Indian goods entering the U.S. in late August.
Rising crude oil prices following recent Middle East tensions were another external risk to watch, though it was too early to assess their full impact, the economic adviser said.
India’s free trade agreements would help cushion some external shocks by opening market access, particularly for labour-intensive sectors benefiting from lower or zero duties, Nageswaran said.
“As and when they become operational, Indian businesses have a good shot at supplying these markets."
India recently concluded negotiations for a trade agreement with the European Union, after signing pacts with the UK and Oman.
On domestic policy, Nageswaran said private investment depended more on demand in the economy than policy measures including tax cuts, adding early indicators suggested a pickup.
Asked about budget priorities, Nageswaran declined to speculate publicly.
(Reporting by Manoj Kumar; Editing by Mrigank Dhaniwala)
