August 31, 2025

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SIGNS OF SLOWDOWN

WITH AN EXPECTED gross domestic product (GDP) growth rate of between 6% and 6.5%, India is likely to remain the fastest-growing big economy in FY26. It is already set to become the fourth-largest economy this year. This is surely a cause for celebrationHowever, that is half the story. Economic growth this fiscal is seen to be much slower than in previous years, even amid expectations of a revival in private consumption, powered by the needs of 1.45 billion Indians, good rains, low inflation and interest rates, as well as personal income tax cutsNo wonder then that the sentiment in India Inc about growth prospects--despite falling inflation, an accommodative monetary policy and good monsoon rains--is muted. This is reflected in the BT-C Fore Business Confidence Survey of 500 chief executive officers (CEOs) and chief financial officers (CFOs) conducted in the second quarter. It received largely cautious responses. The Business Confidence Index (BCI) recovered from the red to climb to 50.2 in the June quarter of FY26 (Q1FY26) from a 15-quarter low of 47.7 in the previous quarterBut the sailing has been far from smooth. The confidence, as measured by the survey, has remained well below the average in recent years. The Q1FY26 reading was, in fact, the second lowest in 14 quarters. A num- ber below 50 indicates a negative mood. Prior to this, it was the lowest in the December 2021 quarter, after which it was on an upward trajectory as India Inc slowly shrugged off the Covid-19 pandemic lows, except for the occasional dipAdd to that the big challenge represented be US President Donald Trump's tariff policies that have kept the world on the edge. India, which faces a 25% tariff on exports to the US and an additional 25% "penalty" for purchase of oil from Russia, is expected to see a slowdown in exports as well as gross domestic product (GDP) growth. Before Trump doubled the tariff on India, Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha that around 55% of the total value of India's merchandise exports to the US would be subject to the reciprocal tariff of 25%, effective August 7The International Monetary Fund (IMF), in its World Economic Outlook Update released in July, raised its global growth forecast for 2025 by 0.2 percentage points to 3%, but warned that "a rebound in effective tariff rates could lead to weaker growth." An escalation of geopolitical tensions, particularly in West Asia or Ukraine, could introduce new supply shocks to the global economy, it cautionedReserve Bank of India (RBI) Governor Sanjay Malhotra, in the recent bi-monthly monetary policy review, noted that economic growth is robust and in line with earlier projections, though below aspirations. "The uncertainties of tariffs are still evolving," he said. The RBI kept its GDP growth forecast for FY26 unchanged at 6.5%. Chief Economic Advisor (CEA) V. Anantha Nageswaran, too, has said that it is too early to gauge the impact of the US tariff, but added that India has not shown any signs of slowing down. The latest survey was conducted between July 10 and 25. By then, India Inc's mood had lifted partially because two major conflicts that threatened to become prolonged came to an end, bringing much-needed peace and stability. This included the brief skirmish between India and Pakistan after a terrorist attack in Kashmir and the Israel-Iran-US military conflict. An

THE AIR INDIA TURNAROUND CHALLENGE

THE AIR INDIA CRASH ON JUNE 12, WHICH KILLED 260 PEOPLE, SECONDS AFTER TAKE-OFF FROM THE AHMEDABAD AIRPORT, WAS THE DEADLIEST AVIATION DISASTER IN INDIA IN OVER A DECADE. IT ALSO RUPTURED THE TATA GROUP'S CAREFULLY MANAGED NARRATIVE OF THE AIRLINE'S REVIVAL. The AI171 Dreamliner crash, amid the much-touted five-year transformation plan, Vihaan. AI, cannot be more nightmarish for an airline struggling to shed the baggage of decades-old state controlTo add to the injuries, Air India will discontinue its non-stop flights between Delhi and Washington, DC, due to a temporary shortage of aircraftA former Air India director provides the crucial context to the crash: "In my over 20 years in the aviation sector, I've never witnessed a crash of this scale. But we need to put this into perspective," says the former official, who did not wish to be named. The official says while accidents are tragic and unfortunate, they are not unprecedented. Almost every major airline has had an incident at some point in its history. Questions are raised about maintenance, procedures, and accountability, but airlines recover even as they learn, adapt, and move forwardAir India too can bounce back but not that easily. Its overhaul has been under strain for a while due to a series of missteps. The Directorate General of Civil Aviation (DGCA) has pulled up the airline's management over issues such as pilot duty timings and fatigue management. According to the civil aviation ministry, a total of nine show-cause notices related to five safety violations have been issued to the airline over the last six months. In July itself, it found 51 safety lapses at Air India. These included incidents regarding a lack of adequate training for pilots, the use of unapproved simulators, and a poor rostering system. These findings assume significance in the context of the recent crash.