Economists commended the government’s initial forecast of real GDP growth at 7.4% for the fiscal year 2025-26, highlighting the potential benefits of a forthcoming trade agreement with the US in boosting investments. The Indian economy’s resilience, driven by festive demand and a steady economic upturn, has been noted. Analysts anticipate a rise in consumer spending due to robust festive sales, GST rationalization 2.0, and income tax reductions.
Recent high-frequency indicators, such as increased auto sales, indicate a surge in demand. Moreover, trade pacts with the UK, Oman, and New Zealand are projected to further elevate economic growth, as stated by Bank of Baroda Economist Jahnavi Prabhakar. Despite these positive forecasts, global uncertainties like geopolitical tensions and trade levies pose potential risks to the outlook.
The forthcoming months are expected to see sustained growth driven by investments and consumer spending. Attention will also be on the Union Budget, corporate performance in the third and fourth quarters, and the RBI’s rate decisions, according to Prabhakar. Projections for the fiscal year 2026-27 place real GDP growth between 7% and 7.5%, slightly lower than the previous year’s estimates.
PHDCCI President Rajeev Juneja attributed the robust growth forecast to increased government spending and industrial investments. Estimates suggest a rise in Government Final Consumption Expenditure (GFCE) by 5.2% year-on-year and Gross Fixed Capital Formation (GFCF) by 7.8% in the fiscal year 2025-26. PHDCCI CEO Dr. Ranjeet Mehta emphasized the government’s efforts to enhance supply chain resilience, implement structural reforms, and boost infrastructure development to bolster India’s growth trajectory.
ICRA Ltd’s Senior Economist Rahul Agrawal anticipates better performance in the industrial and agricultural sectors compared to the NSO’s projections for the second half of fiscal year 2026, with services growth lagging behind. Agrawal also expects the fiscal deficit to remain within the targeted 4.4% of GDP, citing higher non-tax revenues and potential expenditure savings as mitigating factors against lower tax collections.
