Government sources said on Tuesday that the government is planning to take the reforms forward. This includes measures like promoting foreign investment, accelerating disinvestment and asset monetization (earnings from assets). The government wants to maintain India's growth momentum despite the rising cost of fuel and fertilizer imports due to the West Asian crisis. He said that the pace of GDP growth of the country is maintained and domestic consumption is also fine. Sources said that there is no pressure on development, but there are external challenges… The pace of development is visible in every quarter. The domestic economy is performing well, consumption is not decreasing…” He said that the pressure that India is facing due to the increase in the import bill of oil and fertilizers due to the closure of the Strait of Hormuz is not just the usual uncertainties.
Sources said the government will continue reforms in the financial sector, aimed at strengthening the capital market and attracting foreign capital in the long run. Sources said that there is a need to take some steps and India will take these steps gradually to increase FDI inflow into the country. Recent steps taken to support the rupee and improve market access are aimed at strengthening India's position in major global bond indices. Additionally, this will also help in expanding the scope of investors for domestic securities and reducing the cost of borrowing over time.
Last Friday, the government introduced several reforms to increase foreign portfolio investor (FPI) participation in government securities to deepen the capital market. Key measures included tax exemption on interest income, long-term capital gains (LTCG) and short-term capital gains (STCG), expansion of specific securities under the 'Fully Accessible Route' (FAR) and simplification of investment rules. He said the economy is facing challenges due to rising costs of fuel and fertilizer imports related to the Middle East crisis, but growth momentum is being sustained due to strong domestic consumption.
Sources said the government does not see any immediate need to approve additional borrowing or additional spending in the upcoming monsoon session of Parliament, as the uncertainties arising from global trade tensions and tariff issues have already been taken into account in the Budget for FY2027. Sources said that the pace of growth seen in the January-March quarter continues in the first quarter of FY 2027 also. He also said that till now there has been no adverse impact on the flow of remittances (money coming from abroad). Sources said that till now there has been no sign of reduction in remittances (money sent from abroad).
According to government data released on Friday, India's economy is expected to grow at a faster pace of 7.7 percent during 2025-26 compared to 7.1 percent in 2024-25. On the same day, RBI reduced the GDP growth forecast for FY 2027 to 6.6 percent from 6.9 percent. The reasons cited for this were the ongoing conflict in West Asia, rising energy prices, supply disruptions and increasing risks like weather-related uncertainties. Sources also said that despite the increasing cost of imports, the fiscal deficit target of 4.3 percent of GDP for the current financial year can be achieved. The government is actively working on non-tax revenue measures including disinvestment and asset monetization to strengthen its fiscal position.
The government cut excise duty on petrol and diesel by Rs 10 per liter in late March, resulting in a revenue loss of more than Rs 1.23 lakh crore annually. Its purpose was to protect domestic consumers from rising oil prices. Despite petrol and diesel prices increasing by Rs 7.50 per liter in the second half of May, auto fuel rates remain well below cost, leading to under-recovery of about Rs 650 crore per day.
"DIPAM and DPE have a year-long plan and a medium-term outlook for disinvestment and asset monetization. I expect the Rs 80,000 crore budgeted under this head to be higher than the budget estimate," a source said. The government's plan to sell its stake in IDBI Bank is expected to go ahead, officials said, in July after the economic data for the April-June quarter and the impact of the monsoon becomes clear. Macro-economic conditions will be reassessed.
Sources said that high-frequency indicators (rapidly changing economic indicators) are indicating that the economy remains strong. For this, he cited strong GST collection, improving trends of private sector investment and recent industry data, which show a pickup in capital expenditure plans. The government also intends to continue its reform agenda and is considering additional measures to attract foreign direct investment (FDI). Sources said there is no proposal to ban capital outflows. However, due to rising fertilizer prices across the world, pressure on subsidies is increasing.
According to sources, the Fertilizer Ministry has demanded 100 percent increase in subsidy allocation for the current financial year. A provision of Rs 1.71 lakh crore has been made for fertilizer subsidy in the budget for financial year 2027. When asked about the impact of increasing duty on gold import, sources said that it has decreased since then. When asked about the interest of insurance companies after getting permission for up to 100 percent FDI in this sector, sources said that some companies have shown interest. Regarding bringing petrol and diesel under the ambit of GST, sources said that it will depend on when the states bring the proposal before the GST Council. According to sources, the next meeting of the GST Council is expected to be held soon and improvements in the process may be discussed in it.
