Page 20 - Policy & Economic Report - July 2025

July 2026 POLICY AND ECONOMIC
ROEILPO&RGTAS MARKET

only at strengthening domestic industries but also at limiting the strategic capabilities of competitors. As
a result, trade policy has evolved beyond traditional tariff negotiations to encompass technology controls,
critical minerals, semiconductors and investment screening.

Despite these developments, the IMF argues that geopolitical rivalry does not eliminate the economic
case for international trade cooperation. Even strategic competitors continue to benefit from stable
trading relationships because higher tariffs, supply-chain disruptions and retaliatory trade measures
ultimately reduce economic welfare for all participants. The challenge therefore is not whether countries
should cooperate, but how the multilateral trading system can adapt to accommodate legitimate national
security concerns while preserving the benefits of an open global economy.

One of the central arguments advanced by the authors is that the existing WTO framework was designed
for a period when geopolitical considerations played a relatively limited role in trade policy. They propose
that the multilateral system should evolve by introducing carefully designed mechanisms that allow
limited, transparent and rules-based adjustments for geopolitical concerns while minimising adverse
spillover effects on third countries. Such institutional innovation could help avoid prolonged trade wars
and reduce uncertainty for businesses while maintaining confidence in the rules-based trading system.

5. Indian Economy

Snapshot

India's economy in July 2026 exhibits steady momentum driven by robust growth projections and
exceptional consumer confidence. The International Monetary Fund forecast positions India among the
fastest-growing major economies globally, with an expected GDP expansion rate of 6.4% for the 2026–27
fiscal year. This macro-level optimism matches on-the-ground sentiment, as urban consumer confidence
climbed significantly to a score of 67.1, securing India the top global spot for consumer optimism.

Economic activity showed signs of moderation during the month as expansion adjusted to a more
sustainable pace. The HSBC Flash Composite PMI cooled to 54.3 from the previous month's 57.1, reflecting
a softer but steady expansion that was primarily led by a cooling services sector. Despite this slight easing
in business velocity, core industrial output and domestic demand remain resilient enough to anchor the
broader expansionary trend.

Financial stability remains intact with key monetary metrics holding steady through the mid-summer
period. Consumer Price Index inflation hovered comfortably around 4.38%, aligning well within acceptable
policy bands. This controlled inflationary environment allowed the Reserve Bank of India to maintain the
benchmark repo rate at 5.25%, providing a predictable financial environment for corporate borrowing
and consumer credit.

India GDP position

India is expected to remain the fastest-growing major economy in FY 2026–27 despite a moderation in
growth momentum from the previous year. Real Gross Domestic Product (GDP) growth is projected at 6.6

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