India household consumption set to pick up in 2-3 quarters: Report
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
The International Monetary Fund (IMF) Tuesday raised India's economic growth forecast to 6.4% for both FY26 and FY27, citing a more favourable external environment than anticipated in the April outlook.The earlier projections stood at 6.2% for FY26 and 6.3% for FY27.Based on the IMF projections, India is expected to record the highest growth rate among advanced economies and emerging markets and developing ones over the current and next fiscal year.'In India, growth is projected to be 6.4% in 2025 and 2026, with both numbers revised slightly upward, reflecting a more benign external environment than assumed in the April reference forecast,' the IMF said in its latest World Economic Outlook.However, the IMF projections are slightly below the Reserve Bank of India's estimate of 6.5% for FY26. According to the National Statistical Office, India's gross domestic product (GDP) grew 6.5% in FY25.On a calendar year basis, the IMF anticipates India's economy to grow 6.7% in 2025 and 6.4% in 2026.The IMF raised global growth outlook as well, projecting 3% growth in 2025, up from 2.8%, and 3.1% in 2026 compared to April forecast of 3%.'This reflects stronger-than-expected front-loading in anticipation of higher tariffs; lower average effective US tariff rates than announced in April; an improvement in financial conditions, including due to a weaker US dollar; and fiscal expansion in some major jurisdictions,' the IMF said.The IMF highlighted recent US trade policy developments as influential. President Donald Trump's April 2 announcement of reciprocal tariffs, including a 26% duty on India, was followed by a 90-day pause until July 9, later extended to August 1.'Pause in higher tariffs for most of its trading partners and a deescalation of trade tensions with China in May modestly reduced the US effective tariff rate from 24% to about 17%,' said Pierre-Olivier Gourinchas, chief economist at IMF. 'This modest decline in trade tensions, however fragile, has contributed to the resilience of the global economy so far.However, global policy remains highly uncertain, with only a few countries having reached fully-fleshed out trade agreements with the US, he added.The US growth forecast has been revised upward to 1.9% for 2025, driven by lower tariffs than those announced on April 2 and looser financial conditions, with some offset from a faster-than-anticipated slowdown in private demand and weaker immigration, the IMF mentioned.Growth is expected to rise slightly to 2% in 2026, supported by a boost from the One Big Beautiful Bill Act (OBBBA), which is expected to stimulate corporate investment through tax incentives. 'The IMF staff estimates that the OBBBA could raise US output by about 0.5% on average over the WEO horizon through 2030, relative to a baseline without this fiscal package,' added the IMF.China's economic growth forecast has also been upgraded to 4.8% for 2025, due to stronger-than-expected performance in the first half of 2025 and significant reduction in US-China tariffs, according to the IMF. Growth in 2026 is expected at 4.2%, driven by lower effective tariff rates.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
15 minutes ago
- Mint
Swiss Gold Trading Takes Spotlight in Trade Talks With Trump
The trade imbalances that prompted President Donald Trump to slap hefty levies on Swiss imports have been driven by a small industry at the center of the world's gold market. The country is the world's biggest gold-refining hub, thanks to a longstanding reputation for quality and discretion. Billions of dollars worth of gold is constantly flowing into and out of the nation, from mines in South America and Africa to banks in London and New York. Flows of the precious metal cause big swings in the country's trade balances, even if the Swiss refiners capture only a small portion of the value of the commerce. Bullion is by far the country's largest export good, according to Simon J. Evenett of IMD Business School. 'Gold is special,' Evenett said. 'It isn't really manufactured in Switzerland. Processed is a better word.' The impact of the industry is more important than ever as the Trump administration focuses on leveling trade deficits. Record bullion exports of more than $36 billion made up more than two-thirds of Switzerland's trade surplus with the US in the first quarter, according to Swiss customs data. The US president's decision to slap tariffs of 39% on all Swiss imports has caused a shock in the country, with the government having previously been confident it would avoid heavy duties. US Trade Representative Jamieson Greer said the tariffs reflect the balance of commerce with America and the country's willingness to address its trade deficit. The recent flood of gold imports into the US was largely in response to a potentially lucrative trans-Atlantic arbitrage opportunity opened up by concerns the precious metal could get caught up in sweeping US import duties. Traders in Europe wanted to deliver bullion to New York to capture premium prices, but first they needed their metal recast from the 400-ounce bars standard in London — the largest gold trading venue — into the 1 kilo or 100oz bars required by the US-based Comex exchange. That made Switzerland's gold refiners a crucial node in the arbitrage. In the second quarter, that flow reversed after bullion was exempted from Trump's tariffs, leading US prices to fall back into line with the benchmark spot price in London. Switzerland saw a net inflow of well over $1 billion of gold over the period. The exemption means that Switzerland's future gold exports probably wouldn't be hit by the new 39% levy. Despite the vast sums involved in the bullion trade, refining is a relatively small business. Switzerland only has five companies producing investment-grade gold, most of whom only employ a couple of hundred people. While the price of the gold that passes through the refineries has surged to nearly $3,500 an ounce this year, the refiners will usually only capture a couple of dollars of that price when they recast a bar. The Swiss National Bank had addressed the issue earlier this year in a paper, arguing that outsized gold exports to the US shouldn't be included when analyzing the trade relationship between the two economies. This article was generated from an automated news agency feed without modifications to text.
Mint
19 minutes ago
- Mint
Dovish India RBI tone may aid sustained lower yields more than rate cut, traders say
MUMBAI, Aug 5 (Reuters) - A dovish commentary and downward revision to economic forecasts by the Reserve Bank of India could drive a continued fall in government bond yields and overnight index swap rates, even without an actual rate cut, treasury officials said on Tuesday. The RBI is set to announce its policy decision on Wednesday, where most economists expect the central bank to hold rates steady but calls for a cut have grown louder in recent days. "A dovish pause will be better and more positive for markets in the long term than a hawkish rate cut like the one in June," PNB Gilts senior executive vice-president Vijay Sharma said. "The chances of the 10-year bond yield reaching 6.20% are better with a pause than with a cut." In June, the RBI surprised markets with a 50-basis-point rate cut but shifted its stance to neutral from accommodative, and signalled limited room for further easing. Bond yields and swap rates rose following the decision, as traders interpreted it as the end of the rate-cutting cycle. The 10-year benchmark bond yield rose on June 6 and has climbed nearly 20 bps since, while the five-year OIS rate rose by as much as 16 bps. "The RBI did a lot in the last policy, so it would rather wait to see the impact and another rate cut is unlikely. Also, a cut now may not have the desired impact," said Alok Singh, group head of treasury at CSB Bank. Barclays expects a dovish pause along with a 30–40 bps reduction in the RBI's inflation forecast of 3.7% for this fiscal year. Still, expectations for easing have strengthened after the U.S. slapped a 25% tariff on goods from India, which could weigh on growth. "We believe there are enough reasons for the RBI to deviate from its previous guidance, deliver a further 25 bps easing in August, and adopt a more open-ended approach to future rate cuts," Emkay Global economist Madhavi Arora said. (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)
Mint
19 minutes ago
- Mint
Trump tariffs: Is the Indian stock market downplaying the tariff threat — but for how long?
At first glance, it appears that the Indian stock market is downplaying the threat of Trump's tariffs. Contrary to widespread apprehensions that US President Donald Trump's latest tariff threats would trigger a sharp sell-off in the Indian stock market on Tuesday, the domestic market displayed remarkable resilience. Benchmark indices—the Sensex and the Nifty 50—fell about half a per cent each during the session but pared losses as the day progressed. The Nifty 50 dipped below the 24,600 mark but soon reclaimed the level. On July 30, Trump announced a 25 per cent tariff on India and said he would also impose a penalty due to India's energy and defence ties with Russia. On July 4, Trump launched a fresh salvo. Accusing India of profiting from the Russia-Ukraine conflict, US President Donald Trump on August 4 said he will substantially raise tariffs on Indian goods. Trump said that India is not only buying Russian oil but also selling it in the open market for significant profits. 'India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits. They don't care how many people in Ukraine are being killed by the Russian War Machine. Because of this, I will be substantially raising the Tariff paid by India to the USA,' Trump wrote on Truth Social. Trump's tariffs may not have a deep impact on the overall market. Rather, they are expected to affect select sectors such as textiles, pharmaceuticals, electronics, agriculture, and machinery exports. India is a domestically driven economy, so tariffs are unlikely to hit the economy significantly. "The fact that India is a domestically driven economy with exports of merchandise and services accounting for 21 per cent of GDP as of FY25, should offer some comfort. Furthermore, the share of merchandise exports alone is lower at 11 per cent of GDP. Not only is India's overall export dependence relatively low, but its merchandise export exposure to the US is also low at around 2 per cent of GDP, offering additional resilience," said CARE Ratings. "Factoring in the higher reciprocal tariffs and additional penalty on India's exports to the US, we estimate the potential direct impact on India's GDP to be around 0.3-0.4 per cent," the ratings agency said. Moreover, India could try to offset the impact of tariffs on its goods exports by redirecting them to other countries. While the direct impact is manageable, the bigger challenge is a global trade slowdown, which can affect exports and corporate earnings. "Direct impact is limited as India isn't a primary target. But a broader global trade slowdown could weigh on exports and earnings. Risk-off sentiment can also indirectly impact Indian equities. Trump's 25 per cent tariffs on Indian exports present a near-term headwind for the equity market. The move could damage India's growth prospects, limiting foreign portfolio inflow and contributing to near-term volatility," said Jashan Arora, Director at Master Trust Group. The Indian stock market is still hoping that Trump will eventually reduce tariffs on Indian goods to 15–20 per cent. However, a key risk that the market may be ignoring is Trump's unpredictability. More than the tariffs, Trump's unpredictability is the key risk for the market that appears to be being overlooked at this juncture. "The Indian market may be underestimating the risks posed by Trump's unpredictability," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. Vijayakumar underscored that in market analysis, we often differentiate between known unknowns—risks we're aware of but can't fully quantify—and unknown unknowns—risks we can neither predict nor prepare for. Trump straddles both categories. "While he is a known figure, his actions remain highly unpredictable, making him effectively an unknown-unknown for investors," Vijayakumar said. The market is currently ignoring the threat of Trump's tariffs, as it believes such a scenario is unlikely to materialise—since it would not be in the interest of the United States either. However, if Trump suspends trade negotiations with India and decides to raise tariffs on India by another 20-25 per cent, the market will experience a sharp selloff. "If an additional 20-25 per cent tariff is announced and the Nifty's support of 24,500 is broken decisively, the market may crash. The market may see a fall of 5-6 per cent easily," said Vijayakumar. "Investors should remain invested, but this is not the time to buy in the market. One can consider putting some money in gold and fixed income," Vijayakumar said. Read all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
