 "India's economic growth is projected to be the fastest among major economies despite tariff-induced challenges (File image)")
India’s economy is projected to grow at 6.2 per cent in the fiscal year 2025-26, marking a slight reduction of 30 basis points from the previous forecast made in January 2025, according to the latest government economic review.
Despite this downward revision, India remains the fastest-growing major economy globally, experiencing the smallest reduction compared to other significant economies amid heightened global uncertainties and escalating trade tensions.
Several leading financial agencies expect India’s GDP growth rate to hover between 6.3 per cent and 6.7 per cent for FY26. This anticipated growth is backed by solid domestic fundamentals, prudent macroeconomic management, and increasing government capital expenditures.
Inflation downward trend continues
Adding to the optimistic economic outlook, inflation has continued its downward trend, dipping to 3.16 per cent in April 2025— the lowest level recorded since July 2019. A notable decline in food inflation, supported by a good rabi harvest and increased sowing of summer crops, further strengthens this economic optimism.
India’s economy, as of April 2025, showed resilience with robust private consumption, particularly boosted by a rural economic rebound. The services sector continues to expand strongly, partially compensating for softness in merchandise exports due to global trade disruptions. Additionally, India’s foreign exchange reserves remain healthy, providing adequate cushion against external shocks.
The government’s capital expenditure initiatives have significantly buffered the economy against external volatility, and recent direct tax exemptions and fiscal incentives, combined with the Reserve Bank of India’s recent rate cuts, are expected to further stimulate domestic investment and consumption.
Healthy economy despite headwinds
Though external risks persist, notably from a temporary US tariff suspension and continuing global trade policy uncertainties, analysts believe a successful resolution to trade negotiations could energize India’s exports further and possibly lift growth closer to the upper forecast range of 6.8 per cent, as indicated in the latest Economic Survey.
Overall, India’s stable macroeconomic environment, strategic fiscal management, and falling inflation continue to position the country attractively for global investors despite external challenges.