Mid-2025 Indian economy cautiously optimistic: Finance ministry

New Delhi: The Indian economy in mid-2025 presents a picture of cautious optimism, a finance ministry report said on Monday, but it cautioned that in the medium term, given the ongoing momentous shifts in global supply chains in semiconductor chips, rare earths, and magnets, India has its task cut out.“Despite global headwinds marked by trade tensions, geopolitical volatility, and external uncertainties, India’s macroeconomic fundamentals remained resilient,” said the finance ministry’s monthly economic outlook for June. “Aided by robust domestic demand, fiscal prudence, and monetary support, India appears poised to continue as one of the fastest-growing major economies,” the report said, adding that various forecasts projected economic growth for FY26 in the 6.2-6.5% range.The report stated that despite monetary easing and a strong bank balance sheet, credit growth slowed, reflecting cautious borrower sentiment and possibly risk-averse lender behaviour. “A growing preference for bond markets, particularly commercial papers among corporates due to lower borrowing costs, may also explain the shift. Piggybacking on initiatives like the Employment Linked Incentive (ELI) scheme, it is time for corporates to set the ball in motion,” said the report.The report also cautioned that despite the broadly positive outlook, downside risks remain. “While geopolitical tensions have not elevated further, the global slowdown, particularly in the US (which shrank by 0.5% in Q1 2025), could dampen further demand for Indian exports,” said the report.