Indian economy can hit 6.5% growth if US trade deal finalized by Oct: Niti Aayog member Arvind Virmani

"No matter the global uncertainty, a clear and definite bilateral trade agreement by September–October would be enough to get growth back to 6.5%," Virmani told Mint.

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But if this uncertainty persists until December, that growth won’t materialize, he added.

Last month, the International Monetary Fund (IMF) lowered India’s FY26 growth forecast to 6.2% from 6.5%, citing trade risks from the US-led global tariff war.

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The IMF’s revision followed similar cuts by S&P Global, the Asian Development Bank and Moody’s Analytics, which cut its calendar 2025 growth forecast for India to 6.1%, down by 30 basis points from its March projection, again citing US tariff hikes.

Virmani said the conclusion of ongoing trade deals with advanced economies like the US, UK and the EU will aid the Indian economy.

"At present, we are seeing the effect of the global uncertainties on a few things, which include investments, and a fall in commodity prices, including oil. So, for India there is both a positive indirect effect and a negative indirect effect from the ongoing global uncertainties," he said.

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“From past experience, I can say we generally gain enough from the reduction in oil because our oil imports are such a large proportion of our total imports that it has a direct beneficial effect on us."

On 1 May, Brent crude futures settled at $63.12 a barrel, while the US West Texas Intermediate crude futures dropped to close at $58.21, the lowest settlement since March 2021.

Meanwhile, speaking on India's global trade strategy, he said not joining the Regional Comprehensive Economic Partnership (RCEP) was a sensible decision, adding that India needs a three-pronged trade strategy amid the global uncertainties.

"There has to be a strategy for China, one for the high-income developed countries, and a third for the rest of the world," he said.

“The developed countries are now 100% complementary to us. Factors that drive this include our demographics or human capital, and the China factor." 

Rising geopolitical tensions, trade disruptions, and concerns over economic coercion have prompted countries to shift parts of their manufacturing and sourcing to alternative markets.

The pandemic and subsequent global supply chain shocks had already exposed vulnerabilities tied to heavy reliance on China, pushing governments and companies to explore more resilient, multi-country production networks.

India stands to gain from the ongoing global shift toward diversification and de-risking, Virmani said.

Virmani said the government's strong focus on manufacturing has become central to its economic strategy, and periodic policy reviews every two to three years, as being done by the government, reflect good governance and effective policymaking.

"It is not just (about) increasing government investment in infrastructure every year by 30%, which is unsustainable. Now you see where it (the focus) needs to be shifted, where it is efficient, where you can improve things," he added.

India's capital expenditure (capex) target stands at   ₹11.21 trillion, according to the budget estimates for 2025-26, slightly higher than estimates of   ₹11.11 trillion in the previous year.

Since the onset of the pandemic, the government has significantly increased its capex to stimulate economic growth and enhance infrastructure development.

In the fiscal year 2019–20, central government capex stood at ₹3.4 trillion. By 2023–24, it had nearly tripled to ₹9.5 trillion, reflecting a compound annual growth rate (CAGR) of approximately 30% over this period.

In April, the US imposed a 27% reciprocal tariff on Indian goods, pointing to India’s average 52% duty on American imports. However, the increase was temporarily eased to 10% for all countries except China.