India Must Chart Its Own Course

Prevailing global uncertainties have cast a shadow over the Indian economy for some time. Should this situation persist, India could face a stagflationary scenario, characterised by rising prices, increasing unemployment, and slowing economic growth. Such a combination would put immense pressure on the nation's economy. Consequently, despite recording a robust growth rate of 7.7 per cent in the financial year 2025-26, India remains concerned about its future. Forecasts suggest economic growth may decelerate to around 6.6 per cent in the current fiscal year, underscoring the challenges that lie ahead. Against this backdrop, Prime Minister Narendra Modi recently convened a meeting of his Economic Advisory Council to discuss the way forward. Reports indicate that several reforms were considered to sustain growth and strengthen the economy. However, many of these measures are designed for relatively stable conditions and may prove less effective amidst an unprecedented global crisis. The current environment is marked by growing geopolitical tensions, disruptions in supply chains, and increasing protectionism. The established rules and principles that once governed international trade and commerce are now being challenged by powerful nations prioritising their own interests.

One lesson is already clear: India must chart its own course. No external power is likely to rescue the country from the consequences of a volatile global environment. Recognising this reality, policymakers have begun identifying the principal threats confronting the economy and exploring suitable remedial measures. Among the most pressing concerns are rising crude oil prices and recurring disruptions in global supply chains, both of which have adversely affected international trade. Equally worrying is the continued withdrawal of foreign capital from Indian markets. Foreign investors reportedly withdrew INR 1.66 lakh crore during the financial year 2025-26. Furthermore, withdrawals amounting to INR 3.28 lakh crore were recorded within the first five months of the current fiscal year, reflecting growing investor caution and uncertainty.

To reverse this trend, the government has introduced several policy changes aimed at improving the investment climate. These include reductions in tax rates on foreign investments and measures designed to enhance returns. The government hopes such initiatives will encourage both foreign investors and overseas Indians to invest in the country. A steady inflow of foreign capital is essential not only for strengthening foreign exchange reserves but also for protecting the rupee from excessive depreciation against the US dollar. In this context, the Prime Minister has reportedly appealed to citizens to avoid non-essential foreign travel and refrain from purchasing gold for at least a year, in order to conserve precious foreign exchange. At the same time, India must make every effort to boost exports, irrespective of global conditions. While lower taxes and simpler regulations may attract investment, lasting economic strength can only be built through a vibrant export sector. Foreign investment can provide temporary support, but exports generate the foreign exchange necessary to place the economy on a strong and sustainable foundation. If India is to maintain growth and withstand external shocks, export promotion must remain central to its economic strategy.