Poets can never seem to agree on the virtues of the season; economists will rarely concur on the augury divined from carefully culled facts.
In The Canterbury Tales, Geoffrey Chaucer describes April — the month that marks the start of the fiscal year in countries like India, Britain and Japan — as a glorious time when the sun peeks through the clouds, a gentle wind wafts over the “tendre croppes”, and the sweet showers slake the thirst of dried tubers on the parched earth. Over 500 years later, T.S. Eliot blackballed April as the “cruellest month”. His beef was over the manner in which the onset of summer rudely ripped the warmth of winter when Earth was blanketed in “forgetful snow”.
But with economists — poring over numbers and squabbling over facts — you do not need half a millennium to separate moods of joy from despair. The truth is that we live in a time of great tumult. The world has been battered by pestilence, war and a surging tide of bigotry. Even before Donald Trump started to hurl threats against immigrants and tariff thunderbolts in a burst of presidential petulance, the global economy had lurched from one crisis to the next, triggering a cascade of risks and dark prophecies of doom. The global economy has endured a prolonged series of shocks that has underwhelmed growth rates, forcing governments worldwide to turn insular and reorder their policy priorities to the detriment of their closest neighbours, trade partners and decades-old allies.
The forecasts are dire: in April, the International Monetary Fund projected a global growth of 2.8% in 2025 and 3% in 2026, sharply down from 3.3% that it had estimated earlier in January. Even this is only a “reference forecast” because trade tensions, arising from Trump’s tariff threats and resulting policy uncertainty, cloud the crystal ball. To understand just how bad this is, the IMF’s World Economic Outlook provides a perspective: the historical average for global growth between 2000-2019 was 3.7%. Moreover, the IMF said it expected global trade growth to slow down to 1.7%, a downward revision of 1.5 percentage points since January. This gloomy forecast reflects the damage that trade and tariff restrictions will wreak. Crimped trade flows will badly hurt trade-dependent economies.
India is obviously treading with trepidation. There are far too many gremlins that can leap out at any time and wreck its economic prospects even as local businesses pick their way carefully through a scrub that still flickers with selective opportunities. But it would be churlish not to acknowledge that at least on a statistical basis, India is as close as it has ever been to a Goldilocks moment where the porridge is neither too hot nor too cold. In fact, the bowl is warmed just about right: real GDP growth in the fourth quarter of 2024-25 (January-March) came in surprisingly strong at 7.4%. Retail inflation in April sank to 3.16%, the lowest in six years.
The intense debate over growth versus inflation — which led to a freeze on interest rate cuts since June 2019 — has died down for now. And that is why on Friday (June 6), the Reserve Bank of India’s monetary policy mandarins announced a bold 50 basis points cut in the repo rate to 5.50%. The move comes on top of the two cuts of 25 basis points each at the February and April meetings. The even bigger surprise was the decision to slash the cash reserve ratio by a full percentage point to 3%. Clearly, the RBI is asking the banks to open up the throttles on credit by allowing them access to a trove of cash that was sequestered with it. This move alone will funnel over Rs 2.5 trillion into the banking system.
The Narendra Modi government has put a lid on its fiscal deficit, which is projected to dip to 4.4% this year, thereby limiting the need for more borrowings to plug the
gap. Central government debt is expected to go down to 56.1% of GDP in 2025-26 from 57.1% in the previous year. The long-term goal is to pare it to 50% (with a tolerance limit of 1% on either side) by 2031. A tearaway surge in overall government debt — Centre plus states — to over 81% in 2024 had fanned concerns among global credit rating agencies that have used it as a key justification for assigning the lowest rung of investment-grade ratings to India.
The current account deficit — which had kindled concerns last year — is also widely expected to dip to 0.8% in FY25 from the current levels of 1.1% of GDP. The blithe optimism that these numbers trigger is accentuated by a steady stream of positive data from several high-frequency indicators like GST e-way bills and revenue (up by 19.4% and 10.4%, respectively, in Q4), air passenger traffic (up 12%), and tractor sales (up 23.4%). In fact, the only real worry is the slump in electricity demand (down 27.5%).
But this begs the question: is everything really as hunky-dory as these numbers seem to indicate? The sceptics believe that India’s growth story is brittle and it would be unrealistic to expect a buoyant Indian economy when the global economy shudders into a slowdown. Although the RBI projects a 6.5% GDP growth this year, it has cautiously pencilled in a relatively tepid 6.3% growth in the fourth quarter of January-March 2026.
The brutal truth is that we are stuck with a wibbly-wobbly economy where job growth is a chimera that does not chime with seemingly robust economic growth. The manufacturing sector is pretty much in the doghouse with a growth rate of 4.5% in 2024-25 versus 12.3% in the previous year. Private investment, consumption and government spending are also looking pretty ragged right now.
Non-food credit growth grew by 11.2% in the fortnight ended April 18 against 15.4% in the same period a year ago. Credit to industry is growing at a piffling 6.7%. The personal loan segment — which was crackling last year — grew by 14.5% against 17% a year ago. The latest jumbo repo rate cut is designed to crank up a leverage-funded consumption cycle. But it is hard to say whether that hope will be realised and felt evenly across all sectors. Industry and market mavens have also started to worry about net FDI flows which, the latest RBI annual report says, tumbled to US$ 0.4 billion during 2024-25 from US$ 10.1 billion a year ago.
But beyond the litany of gloomy statistics, there is a growing sense of disquiet over needless government intervention that tends to foster cronyism, regulatory overreach, legislative gridlock on land, labour and farm sector reforms, and widening income disparities. The pressure on India to sign an interim trade deal with the US that involves low tariffs on US farm products and automobiles opens up a fresh set of challenges for domestic producers. The time has come for a hard policy reset backed by a firm resolve not to be bullied into compromising the interests of the nation and its people.
Saumitra Dasgupta is a senior journalist who writes on economic issues