India’s economy is demonstrating remarkable strength, poised for substantial GDP growth in the current fiscal year and beyond. Recent analysis from Deloitte India projects a robust 7.5-7.8% expansion for the ongoing fiscal period, fueled by strong domestic demand, particularly during the festive season, and a thriving services sector. This positive trajectory is expected to continue, albeit at a slightly moderated pace, into FY27, navigating a complex global landscape.
Strong Economic Performance in FY26
Despite facing headwinds from global trade disruptions, shifting policies in developed nations, and fluctuating capital flows, India’s real GDP surged by 8% in the first half of the 2025-26 fiscal year. This impressive performance underscores the underlying resilience of the Indian economy and the effectiveness of proactive government measures. Deloitte’s report highlights that this isn’t simply luck, but a direct result of “sustained pro-growth policies” implemented over recent years.
Domestic Demand as a Key Driver
The surge in domestic demand is a cornerstone of this economic success. Early in 2025, recognizing potential external risks, policymakers swiftly implemented a series of demand-boosting initiatives. These included strategic tax exemptions, reductions in policy interest rates, and a streamlining of the Goods and Services Tax (GST) structure. These actions were designed to stimulate consumption and investment, and they demonstrably succeeded in bolstering economic activity.
Furthermore, favorable inflation trends have contributed to increased consumer spending power. This, combined with the policy interventions, created a positive feedback loop, driving up demand across various sectors. The festive season, a traditionally strong period for consumption in India, provided an additional significant boost.
Navigating Global Uncertainties and Future Projections
While the current fiscal year looks promising, Deloitte anticipates a slight moderation in GDP growth to 6.6-6.9% in FY2026-27. This expected slowdown isn’t indicative of weakness, but rather a natural consequence of operating on a higher base and contending with ongoing global uncertainties. These uncertainties include geopolitical tensions, unpredictable trade policies, and slower growth in key international partner economies.
However, India is actively working to mitigate these external risks through strategic trade diversification. The country has been aggressively pursuing Free Trade Agreements (FTAs) with several key nations.
Expanding Trade Partnerships
Significant progress has been made in forging new trade relationships. India has recently signed agreements with the UK, New Zealand, and Oman, and is currently engaged in negotiations with Israel. The existing EFTA deal, operational since 2025, is also contributing to this diversification.
These partnerships are expected to unlock significant manufacturing opportunities and expand the reach of India’s burgeoning services sector beyond its traditional reliance on the US market. Crucially, they also reinforce investor confidence, paving the way for increased Foreign Direct Investment (FDI), which remains vital for funding infrastructure development and industrial expansion. This focus on economic reforms is key to sustained growth.
Shifting Policy Focus Towards Supply-Side Improvements
Looking ahead to 2026, the policy emphasis is expected to shift from demand-side measures to supply-side reforms. According to Rumki Majumdar, Economist at Deloitte India, the focus will be on strengthening Micro, Small, and Medium Enterprises (MSMEs) and fostering the growth of Tier-2 and Tier-3 cities as new economic hubs.
This strategic shift recognizes that sustained economic growth requires a robust and diversified supply chain. Empowering MSMEs, which are a significant source of employment and innovation, and developing smaller cities will help to distribute economic benefits more widely and reduce regional disparities. Investing in infrastructure and skill development in these areas will be paramount.
The India-US Trade Deal and Currency Stability
Deloitte anticipates a positive development in the near future: the conclusion of a trade deal with the United States by the end of the current fiscal year. This agreement is expected to revitalize foreign investment and contribute to the stabilization of the Indian currency. A stronger and more stable currency will further enhance India’s attractiveness as an investment destination and facilitate international trade.
The report also acknowledges that external risks remain elevated, though their full impact may not be felt in the current fiscal year. However, proactive policy measures and a focus on diversification are positioning India to weather these challenges effectively. The overall outlook remains optimistic, with India continuing to be a bright spot in the global economy. The continued implementation of fiscal policy will be crucial.
In conclusion, India’s economic story in 2025 is one of resilience, driven by decisive policy actions and strong domestic demand. While challenges remain on the global front, the country is actively mitigating these risks through trade diversification and a strategic shift towards supply-side reforms. The projected GDP growth figures demonstrate India’s potential to become a leading global economic power. To learn more about India’s economic landscape and investment opportunities, explore resources from the Department of Economic Affairs and the Reserve Bank of India.