(Jan 29): India’s government predicted the economy could expand more than 7% in the coming financial year, offering an optimistic outlook at a time of heightened uncertainty for global trade.
The South Asian economy is projected to grow 6.8% to 7.2% in the fiscal year starting in April, according to the Economic Survey for 2025-26 released by the Ministry of Finance on Thursday, offering a more bullish outlook than market consensus. For the current financial year, 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%,” the government said in the Economic Survey, which is an annual report card on the economy. “The outlook, therefore, is one of steady growth amid global uncertainty, requiring caution, but not pessimism.”
With these projections, India’s growth is set to outpace other major economies despite tensions with the US. New Delhi remains one of the few large economies yet to sign a trade deal with Washington and is still saddled with 50% US tariffs, hurting key labour-intensive sectors.
Prime Minister Narendra Modi is seeking to blunt the impact by pushing through far-reaching policy reforms in recent months. His government has cut consumption taxes and implemented overhauled labour codes, long-sought changes by businesses. India has also completed four free trade agreements since May, including a long-awaited deal with the European Union.
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Inflation is low, balance sheets of firms and households are healthier and consumption demand remains resilient, the government said in the report. “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 the coming financial year, 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.”
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The report flagged shortcomings in India’s export policies, particularly for agriculture. The world’s second-largest agricultural producer by value has the potential to reach US$100 billion in exports of agricultural, marine, and food and beverage products within four years, it said. Frequent policy changes, however, risk disrupting supply chains, creating uncertainty and pushing foreign buyers towards alternative sources, with lost export markets difficult to regain, it added.
The comments come as India has kept dairy and other sensitive farm products out of its recent free trade agreements, reflecting domestic political considerations. Farmers remain a key voting bloc in the world’s most populous nation, where millions of smallholders own less than two hectares (five acres) of land.
By better balancing domestic needs with export opportunities, India’s farm output could support export-led growth and help meet the target, the report said.
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