Sovrenn Times: Macroeconomy Update | 08 Sep 2025
FM Sitharaman: ₹48,000 Cr GST Shortfall to be Offset by Consumption Surge, Fiscal Deficit Target Safe
Finance Minister Nirmala Sitharaman said the ₹48,000 crore GST revenue shortfall from recent tax cuts will be offset by a consumption-driven buoyancy, ensuring no slippage in the FY26 fiscal deficit target of 4.4% of GDP (₹15.69 lakh crore). The landmark GST overhaul effective Sept 22 reduces rates on nearly 400 items, exempts health and life insurance premiums, and shifts to a 5%, 18%, and 40% slab structure. Sitharaman called it a “people’s reform” that will benefit all households, from the poorest to the middle class. She noted that the consumption boost, combined with Q1 FY26 GDP growth of 7.8%, could push full-year growth above the projected 6.3–6.8% range. Daily-use goods like bread, milk, and paneer will attract zero tax, while EVs and small cars will be taxed at 5% and white goods at 18%. India remains the world’s fastest-growing major economy, ahead of China’s 5.2% Q2 growth.
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India Fast-Tracks Mega Infrastructure Push Under Vision 2047 to Sustain Growth
The government is prioritising large-scale infrastructure projects, including bullet train corridors, mega shipyards, multiple ports, and 50,000 km of access-controlled highways, as part of its Viksit Bharat 2047 vision. With Rs 11.21 lakh crore earmarked for infrastructure in FY26, ministries have been directed to bundle and fast-track approvals, while encouraging PPPs to optimise spending. Officials said projects of national importance with cross-state impact will get top priority. According to the World Bank, India must raise its real investment rate from 33.5% of GDP to 40% by 2035 to sustain long-term growth. A high-level committee led by IN-SPACe chairman Pawan Goenka is reviewing ministry targets for Vision 2047. The strategy comes as India posted 7.8% GDP growth in Q1, with the Centre pushing infrastructure creation to offset geopolitical and tariff headwinds.
India Calls for Export Diversification and Supply Chain Resilience at SCO, Bloc Represents 42% Population & 17.2% Global Trade
At the SCO Trade Ministers’ Meet in Vladivostok, India stressed diversifying exports and building resilient supply chains across the bloc that accounts for 42% of global population and 17.2% of world trade. India pressed for WTO reforms, including a permanent solution on public stockholding and restoration of the dispute settlement system. It proposed SCO collaboration on digital economy, showcasing UPI and ONDC as low-cost replicable models for MSMEs. Mission LiFE was highlighted to link climate action with affordable finance and technology. India also positioned the AVGC sector and film production as engines of jobs and exports. It reaffirmed commitment to inclusive regional growth under Tajikistan’s SCO chairmanship.
India’s Coal Imports Fall 16.4% in July to 21 MT on Weak Monsoon Demand, High Stock Levels
India’s coal imports dropped 16.4% YoY to 21.08 MT in July, compared to 25.23 MT a year earlier, as monsoon dampened demand and stocks remained high. Imports in April–July fell to 97.49 MT from 100.48 MT last year. Non-coking coal imports slid to 11.54 MT in July from 16.52 MT, while coking coal rose to 5.85 MT from 4.81 MT. In the April–July period, non-coking coal stood at 60.62 MT (vs 65.64 MT) and coking coal at 22.22 MT (vs 20.26 MT). Officials expect demand to rise ahead of the festive season. The government has assured no coal shortages during monsoon, highlighting efforts to reduce import dependence and ensure steady power sector supply.
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India-EU FTA Talks Enter Crucial Phase as Bilateral Trade Hits $135 Billion
India and the European Union, whose goods trade reached $135 billion in FY24, are pushing to conclude a long-pending Free Trade Agreement (FTA) by year-end. Two back-to-back negotiation rounds are planned — this week in New Delhi and next month in Brussels to resolve differences on rules of origin, market access, and duties on wine and dairy. So far, 11 chapters including digital trade, customs, and SMEs have been finalised, but contentious issues like non-tariff barriers remain. The FTA comes alongside a new EU strategic vision for ties with India, to be unveiled on September 17, and growing cooperation in defence, technology, and counter-terrorism. Leaders on both sides have pledged to fast-track talks, viewing the pact as pivotal for global stability and supply chain resilience.