India’s economy forecast to grow 7.4% in FY26, estimates show

India’s economy is projected to grow 7.4% in the fiscal year ending March 2026, rebounding from 6.5% in the previous year despite mounting global trade uncertainties, according to first advance estimates released by the Indian government on Wednesday.

The estimate marks an improvement over fiscal 2025, when growth slowed to its weakest pace since the pandemic. Initial projections last year had put growth at 6.4%, before the figure was revised to 6.5% in May, underscoring concerns over slowing momentum in the world’s fastest-growing major economy.

The latest outlook points to continued strength in domestic demand. Private consumption is expected to expand by 7% in FY26, only slightly below the 7.2% recorded a year earlier, while government spending is projected to rise 5.2%, sharply higher than the 2.3% increase seen in the previous fiscal year.

Trade, however, remains a key risk. Indian exports to the United States, its largest trading partner, have been subject to 50% tariffs since August last year. While negotiations towards a bilateral trade agreement are ongoing, economists warn that prolonged tariffs could weigh on export growth and overall economic momentum, Reuters reported.

International agencies remain cautious. Last month, the International Monetary Fund said India’s real GDP was likely to grow 6.6% in fiscal 2026 before easing to 6.2% in fiscal 2027, assuming delays in resolving trade frictions with the US.

Even so, recent data suggest notable resilience. India’s economy grew 7.8% in the June quarter and accelerated further to 8.2% in the three months ending September, beating market expectations and helping offset concerns over external demand.

Cooling inflation has also provided policymakers with room to support growth. The Reserve Bank of India last month revised its real GDP growth forecast for FY26 to 7.3% from an earlier 6.8%, citing easing price pressures. The central bank also lowered its consumer price inflation forecast to 2.0% from 2.6% and cut its policy rate by 25 basis points to 5.25%, even as it flagged weakness in some economic indicators.

If the projected growth materialises, India is expected to overtake Germany to become the world’s fourth-largest economy, reinforcing its position as a key driver of global growth at a time of heightened geopolitical and trade uncertainty.