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Informist, Friday, Oct. 3, 2025

 

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--Sitharaman: India growth firmly anchored by domestic demand 
--CONTEXT: Finance Minister Sitharaman speaking at Kautilya Economic Conclave 
--Sitharaman: No room for complacency amid current econ conditions 
--Sitharaman: 8% GDP growth will help achieve Viksit Bharat goals by 2047 
--Sitharaman: India still climbing development ladder, trade-offs are acute 
--Sitharaman: India econ trade-offs accentuated by slowing globalisation 
--Sitharaman: Trade imbalances hollowed out some nations 
--Sitharaman: Energy imbalance led some econs to chronically depend on imports 
--Sitharaman: Task at hand is to confront imbalances 
--Sitharaman: Need to reform global institutions to serve current needs 
--Sitharaman: Geopolitical conflicts are intensifying
--Sitharaman: Tariffs, conflicts reshaping global trade 
--Sitharaman: India cannot be passive spectator to global shifts
--Sitharaman: Can assure commitment to capex will continue
--Sitharaman: Seeing appetite for public-private partnership in India
--Sitharaman: See lot of investment absorption capacity in states

 

NEW DELHI – Amidst the global economic shifts, India cannot "afford to be passive spectators in a world where decisions elsewhere determine our destinies", Finance Minister Nirmala Sitharaman said Friday. "We must be active participants, shaping outcomes where possible and preserving autonomy where necessary," she said. 

Her comments come against the backdrop of the Indian economy having to deal with exogenous pressures emanating from conflicts, unilateral sanctions and tariffs, shaping the scope of domestic growth. "Stating that the present is turbulent, in some sense, would be to understate the scale of the challenge at hand," Sitharaman said while speaking at Kautilya Economic Conclave organised by the finance ministry.

The international order is morphing, she said, adding that trade flows are being reshaped, alliances are being tested, investments are being re-routed along geopolitical lines, and shared commitments are being re-examined. "Thus, what we face is not a temporary disruption but a structural transformation," the finance minister said.

Beyond the pressures from geopolitical conflicts, the Indian economy, particularly exports and capital formation, currently faces risks from the imposition of tariffs by the US. Citing displeasure over the high trade gap, the US has imposed a 25% reciprocal tariff on India, with an additional 25% as a punitive tariff for trading with Russia. US' higher tariffs on India result in a pricing disadvantage of 30–35% for Indian exports, making them less competitive compared with those from China, Vietnam, Cambodia, the Philippines, and other Southeast and South Asian countries. The US accounts for nearly 20% of India's total exports.

Against these external factors, Sitharaman said that India's economy is resilient. "With the steady share of consumption and investment in the overall GDP over the years, India's growth is firmly anchored in its domestic factors, which minimises the impact of external shocks on overall growth," she said. An 8% annual GDP growth will help India achieve its target of being a developed nation by 2047, the finance minister added.

 

According to the data released earlier by the statistics ministry, India's GDP grew 7.8% in Apr-Jun, which was a surprise on the upside. The Reserve Bank of India also revised India's GDP growth view upwards by 30 basis points to 6.8% on Wednesday.

Despite the strong GDP print in Apr-Jun and overall resilience, Sitharaman said, "there is no room for complacency or self-congratulation beyond a quiet confidence in our abilities to take the right decisions and execute them".

 

According to the finance minister, for nations still climbing the development ladder, including India, the trade-offs are particularly acute in areas like energy transition and energy security, the imperative of growth and the urgency of sustainability, the drive for innovation and the realities of labour markets with young populations, the want for capital and the burden of high borrowing costs, the demands of productive investment and the temptations of financialisation.

 

"These trade-offs define our options. They are not easily resolved, yet they cannot be ignored," she said. "These trade-offs are accentuated in a world with trends towards de-risking, decoupling, and, hence, slowing globalisation." 

 

Delving deeper into the point of imbalances, Sitharaman said that trade imbalances have hollowed out industries in some nations while creating overcapacity in others. On the other hand, financial imbalances have concentrated wealth in speculative sectors while depriving the real economy of investment. Energy imbalances have made some societies chronically dependent on costly imports even as others subsidise their industries with cheap, carbon-intensive power, she said. "These imbalances have become structural features of our world, distorting incentives and fuelling political discontent," she said.

 

"The task before us, therefore, is not simply to manage uncertainty but to confront imbalance," the finance minister said. The tasks include countries and policymakers needing to weigh how international institutions can be reformed to reflect today's realities rather than yesterday's hierarchies, she said. And crucially, how can the voices of developing nations, no longer marginalised in rulemaking, be amplified in shaping the future, she added. 

 

To support domestic growth, the finance minister said that she can "assure" that the government's thrust on public spending – particularly capital expenditure to boost asset creation and capital formation – will continue. In the post-COVID era, the Narendra Modi government has pressed the accelerator hard on capital expenditure to drive growth in the economy. In the past five years, the government has increased the Centre's capital expenditure by more than three times to INR 11.21 trillion for 2025-26 (Apr-Mar). 

 

In its endeavour to push capital expenditure, the Centre has been incentivising states to create capital assets as well, including launching the scheme for special assistance to states to carry out capital investment in the Budget for FY22. Under this, the Centre gives 50-year interest-free loans to states to carry out capital expenditure. In the current fiscal, the Centre has earmarked INR 1.50 trillion under the scheme. According to the finance minister, the Centre has pushed for holistic capital investment in the economy and there is a lot of investment absorption capacity being seen in states. 

 

In terms of investment, beyond public investments, a lot of investments are flowing in through public-private partnerships as well, she said.   End

 

Reported by Priyasmita Dutta

Edited by Deepshikha Bhardwaj

 

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