'Prolonged uncertainty' may cause private capital formation on hold, warns Finance Ministry report

This comes even as the International Monetary Fund (IMF) last week lowered India's economic growth forecast for FY26 citing trade tensions and global uncertainty.

Uncertainties from global developments are a key risk for India's growth outlook this fiscal, the Ministry of Finance said in its monthly economic report released on April 29, adding that any prolonged uncertainty could lead private companies delaying investment plans.

The government in its economic report said that private companies and policymakers must remain alert to rising risks and 'act urgently'.

"...uncertainties stemming from global developments constitute a key risk for the growth outlook for FY26. More than trade, the perception of prolonged uncertainty may cause the private sector to put its capital formation plans on hold. The private sector and policymakers must be mindful of this risk and act urgently to avoid making uncertainty feed upon itself," the monthly economic report said.

Nudging the private sector and policymakers, the report said this opportunity should not be missed. "The domestic economy is large, and capital formation can lead to a mutually reinforcing cycle of investment-income growth-demand growth-additional capacity creation. In contrast to normal times, action and execution have greater impacts now. It is an opportunity not to be missed."

The report said geopolitical tensions, disruptions to supply chains, tariffs, and trade-related uncertainties are posing 'downside risks to global growth'.

There are also apprehensions of the global economy facing higher inflation and lower growth in the near term, which has led to forecasters revising global growth estimates downwards, due to uncertainties and trade protectionism, the report added. This comes even as the International Monetary Fund (IMF) last week lowered India's economic growth forecast for FY26 citing trade tensions and global uncertainty.

The report, prepared by the chief economic adviser called it 'imperative' for India to shape its domestic policy and regulatory environment in order to encourage capital formation, hiring and production.

However, the high-frequency indicators are suggesting that the economy’s performance has been robust during the March quarter. "Gross GST collection jumped to Rs 1.96 lakh crore in March 2025 on the back of buoyant economic activity," adding, "...the E-way bill generation recorded growth of 20.2 per cent in March 2025." These parameters have indicated a heightened economic activity in Q4FY25 compared to previous quarters.