Rise in private investment will help India overcome global risks: FinMin

Making a strong case for increasing private investment, the Finance Ministry on Wednesday in a report said it can help the country overcome risks to the growth emanating from external factors.

The report emphasised that the private sector should draw comfort from resilience of the Indian economy and its steady growth outlook.

“It is essential that the industry recognises the mutual endogeneity of its investment spending and consumption demand,” the February edition of Monthly Economic Review released by Department of Economic Affairs said.

Pointing out that consumption is expected to get a leg-up with relief in income tax and reduction in policy rate by the RBI, the report said, the private sector should pick up signals from these steps and start making investment towards capacity expansion.

Domestic private sector capital formation, focused on India’s solid fundamentals and economic prospects, will be an important driver of economic growth in FY26, it said.

“The proposed changes in the personal income tax structure are expected to improve the disposable incomes of the middle class and their consumption. The 25-basis point policy rate cut in February, as part of a more accommodative monetary policy and enhanced liquidity provisions, can also bolster the growth momentum,” it said.

The Union Budget’s focus on longer-term development drivers and reforms, anchored around the ambition of Viksit Bharat, adds to the confidence in domestic economic resilience amidst significant global uncertainties, it added.

On inflation, the report said, it has eased to a seven-month low in February 2025, driven by falling food inflation.

The expectation of record production of foodgrains in 2024-25 will help moderate food inflation in the coming months, it said.

On the external front, it said, core merchandise exports have shown notable resilience, growing by 8.2% during FY25 (April to February).