6.3-6.8%: Government retains FY26 growth estimate

New Delhi: Govt has retained the 6.3-6.8% growth projection for the current financial year, despite expectations of Trump's tariffs denting economic activity and overall global demand.

While steps such as the proposed reduction in GST will aid domestic consumption, chief economic adviser V Anantha Nageswaran told reporters Friday that the tension is likely to ease, and the impact may be concentrated during the July-Sept quarter. He is also counting on low inflation and the festival season to result in good demand in the coming months.

Good rains and higher sowing are expected to keep rural demand strong. High frequency indicators such as fuel consumption and e-way bill generation point to the first quarter consumption boom continuing during the current quarter too.

"There is some uncertainty... but in general, conversation is going on, and there is expectation that we will see some kind of a resolution in not-so-distant future. We do believe that growth target for current fiscal, especially in line with strong showing by economy in first quarter, we retain the 6.3-6.8% range for current fiscal," he told reporters after the release of the first quarter GDP estimates.

The estimate assumes that the disruption is short lived. "There could be some downside risks to the (growth) projections if the (penal) tariffs remain for a longer period, but we are hopeful it would be resolved sooner," he said.

While there may be some "negative shock" in this quarter, it may be tough to predict at the moment.

Govt has said that it will push reforms and steps such as GST will provide a boost to domestic demand as it seeks to cushion the impact of the blow.

"The removal of the uncertainty may unleash higher growth in the third and fourth quarters compensating the impact of the second quarter," Nageswaran said, adding that it is difficult to estimate the downside impact of high tariffs on growth as the situation is uncertain.

Nageswaran suggested that exporters can use the current situation as an opportunity. "This is an opportunity for exporters to boost competitiveness of their products and explore other markets as well. So collectively, between the public and the private sector initiatives, we can turn this situation into one of long-term strength and opportunity."