The Indian economy can expand at more than 7% in 2026-27, the government said on Thursday, offering an optimistic outlook for the world’s fourth largest economy at a time of heightened uncertainty for global trade.
India is projected to clock a GDP growth rate of 6.8% to 7.2% in the fiscal year starting on 1 April 2026, according to the Economic Survey for 2025-26 released by the Union Ministry of Finance. That’s a more bullish outlook than market consensus. For FY26, the government estimates the economy will expand 7.4%, driven by consumption and investment.
“The cumulative impact of policy reforms over recent years appears to have lifted the economy’s medium-term growth potential closer to 7%,” stated the Economic Survey—an annual report card on the economy released before the Union Budget. “The outlook, therefore, is one of steady growth amid global uncertainty, requiring caution, but not pessimism.”
Essentially, India would retain the bragging rights as the fastest growing major economy in the world for at least one more year, despite 50% US tariffs on its exports. New Delhi remains one of the few large economies yet to sign a trade deal with Washington.
Reforms Engine vs Tariff Blockades
The Narendra Modi government has sought to blunt the impact of US tariffs on the Indian economy by pushing far-reaching policy reforms in recent months.
- In September, India slashed GST rates on hundreds of items—from soaps to small cars—in the biggest indirect tax reforms since Goods and Services Tax came into effect on 1 July 2017.
- India recently overhauled its myriad labour laws into just four labour codes to simplify employment in the world’s most populous nation.
- Since May, India has signed four free trade agreements, including a long-awaited trade deal with the European Union earlier this week.
- The Reserve Bank of India has reduced its repo rate by 125 basis points since April 2025, in an attempt to spur investments in the economy.
Inflation is low, balance sheets of firms and households are healthier and consumption demand remains resilient, the Economic Survey 2025-26 stated. “These conditions provide resilience against external shocks and support the continuation of growth momentum.”
Still, economists say those efforts may not fully make up for losses tied to the lack of a trade deal with the US. The International Monetary Fund forecasts 6.2% growth in FY27, if steep tariffs remain in place.
The Indian government is more optimistic, with the Economic Survey saying “ongoing trade negotiations with the US are expected to conclude during the year, which could help reduce uncertainty on the external front.”
