NEW DELHI: Uncertainty stemming from global developments constitutes a key risk for the country’s growth outlook for FY26, a finance ministry report said on Tuesday. It cautioned that more than trade, the perception of prolonged uncertainty may cause the private sector to put its capital formation plans on hold.
The finance ministry’s monthly economic report said the private sector and policymakers must be mindful of this risk and act urgently to avoid making uncertainty feed upon itself.
“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,” said the report for March.

It stated amid global turbulence, it is imperative for India to nurture domestic policy and regulatory environments that are conducive to capital formation, hiring and output growth. Several multilateral agencies, including IMF and World Bank, have trimmed India’s growth projections, citing the impact of global trade and geopolitical tensions.
The report also mentioned that India’s long-term growth is driven by macroeconomic stability, a resilient external sector, declining fiscal deficit, easing inflation, improving employment prospects, and high consumption expenditure. “Private capital formation holds the key to the sustainability of this favourable constellation. Public policy and regulatory measures can both facilitate and nudge the private sector to do its part.”