The government on Thursday said the Indian economy could expand at more than 7% in 2026-27, offering an optimistic outlook for the world’s fourth-largest economy at a time of growing uncertainty for global trade.
According to the Economic Survey 2025-26 released by the Union Finance Ministry, India’s GDP growth rate is estimated at 6.8% to 7.2% in the fiscal year starting April 1, 2026. This is a more bullish outlook than market consensus. For FY26, the government estimates the economy to expand 7.4% led by consumption and investment.
“The cumulative effect of policy reforms in recent years has raised the medium-term growth potential of the economy to close to 7%,” the Economic Survey – an annual report card on the economy released ahead of the Union Budget – said. “Therefore, the outlook is one of stable growth amid global uncertainty, requiring caution, but not pessimism.”
Essentially, India will retain bragging rights as the fastest growing major economy in the world for at least another year, despite 50% US tariffs on its exports. New Delhi remains one of the few major economies to sign a trade deal with Washington.
Reform Engine vs. Tariff Barriers
The Narendra Modi government has sought to mitigate the impact of US tariffs on the Indian economy by pursuing far-reaching policy reforms in recent months.
- In September, India cut GST rates on hundreds of goods from soap to small cars in the biggest indirect tax reforms since the Goods and Services Tax was implemented on July 1, 2017.
- India recently condensed its myriad labor laws into just four labor codes to simplify employment in the world’s most populous country.
- Since May, India has signed four free trade agreements, including a long-awaited trade agreement with the European Union earlier this week.
- In an effort to boost investment in the economy, the Reserve Bank of India has cut its repo rate by 125 basis points from April 2025.
The Economic Survey 2025-26 said inflation is low, balance sheets of companies and households are healthy and consumption demand remains resilient. “These conditions provide resilience against external shocks and help sustain the growth momentum.”
Still, economists say these efforts cannot fully offset the losses caused by the lack of a trade deal with the US. The International Monetary Fund estimates growth of 6.2% in fiscal 2027 if tariff rates remain in place.
The Indian government is more optimistic, with the Economic Survey saying that “ongoing trade talks with the US are expected to conclude during the year, which may help reduce uncertainty on the external front.”