Handle with due care: The Indian economy is at a pivotal juncture

Evolving global conditions present India opportunities. Indian policymakers must be careful in managing key challenges

- PRACHI MISHRA

The economic landscape has shifted dramatically this year. What seemed like an inevitable march towards global recession has given way to cautious optimism, driven primarily by an unexpected de-escalation of trade hostilities between the world's two largest economies. US President Donald Trump's decision to scale back tariffs—from an initial increase of 10 percentage points to a peak of 145 percentage points and then declining by 115 percentage points following the 12 May US-China trade deal—has fundamentally altered the global economic trajectory.

This trade détente couldn't have come at a better time for India. As tariffs between the US and China decline, leaving residual increases of just 30 percentage points on US imports from China and 10 percentage points on Chinese imports from the US, global supply chains are beginning to recalibrate. For India, this presents an unprecedented opportunity to position itself as a reliable alternative in global value chains, particularly as companies seek to diversify their manufacturing bases.

Beyond favourable global winds, India's domestic economy is also showing signs of revival. The most recent gross domestic product (GDP) data reveals a robust and above-consensus 7.4% year-on-year growth and 9.8% seasonally adjusted annual rate in the first quarter of calendar year 2025—a figure that would have seemed optimistic just months ago. This isn't merely a statistical quirk. High-frequency indicators across the board paint a picture of economic acceleration.