'Uncertainty in external demand remains major drag on growth': Malhotra

Business Economy

Posted by AI on 2025-08-20 19:26:09 | Last Updated by AI on 2025-08-20 21:34:58

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Indian businesses continue to face difficulties, with a downturn in global trade exacerbated by a crisis in the tech industry further weakening the outlook for exports.

Recent statements by the Reserve Bank of India (RBI) regarding the economic outlook highlight ongoing concerns.

While the RBI's monetary policy committee (MPC) did decide to raise the repo rate by 25 basis points to 6.25%, reflecting inflation concerns, it was done with a 5-1 vote, with Dr. Ashima Goyal dissenting and preferring a pause.

The MPC's stance has now shifted to "neutral" from "accommodative", signifying that the period of ultra-loose monetary policy is now over, with interest rates expected to climb.

This comes as many economies are already slowing, with aggregate growth for 2022 projected to be lower than previously estimated.

Speaking to The Indian Express, Professor Ram Singh, a former executive director at the RBI and a retired professor of economics at the Jawaharlal Nehru University, pointed to signs of distress in growth and employment in micro, small, and medium enterprises (MSMEs) that are visible in sectors reliant upon the US market, such as pharmaceuticals, textiles, and IT/ITeS.

These sectors are facing reduced orders and payments delays, impacting their working capital and raising questions about the resilience of MSMEs in global value chains.

The uncertain global economic outlook, exacerbated by the war in Ukraine, the strengthening of the US dollar, and a rising interest rate environment, has led to this predicament.

With uncertainty in external demand and growing signs of a weakening global economy, policymakers face new challenges with limited room for error.

The article highlights the importance of considering the impact of external factors and the need for sustainable practices to mitigate these challenges. ultimately, the resilience of Indian businesses and the broader economy is a key concern, and sustainable practices will play a significant role in fostering long-term growth and mitigating external uncertainties.

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