India's Economic Growth Projection
India's economy is forecasted to grow by 6.6% in the fiscal year 2026-27, as per the United Nations (UN). This growth is driven by resilient consumption and strong public investment.
Factors Supporting Growth
- Resilient private consumption and strong public investment.
- Recent tax reforms and lower interest rates.
- Projected 7.4% growth in FY 2025-26 by the statistics ministry.
External Headwinds and Export Impact
While higher US tariffs could negatively impact exports, especially since the US makes up about 18% of India's exports, key sectors like electronics and smartphones may remain exempt. Additional demand from Europe and the Middle East is expected to mitigate the impact.
Supply Side and Debt Concerns
- Expansion in manufacturing and services sectors is crucial for growth.
- Debt servicing costs are higher than pre-pandemic levels, with interest payments taking up a quarter of government revenues. However, India's high growth rate and the nature of its debt reduce the severity of this issue.
Industrial Policy and Inflation Mitigation
India’s industrial policies aiming to expand domestic production of edible oils and pulses, modernize infrastructure, and improve logistics have helped reduce import dependence and exposure to global shocks, thus addressing inflationary pressures.
Global Growth Context
Global growth is estimated at 2.7% in 2026, rising to 2.9% in 2027, which is below the pre-pandemic average of 3.2%. Macroeconomic uncertainty and limited fiscal space are ongoing challenges despite opportunities for monetary easing.
Outlook by Dun & Bradstreet
Dun & Bradstreet projects a 6.6% growth in FY27, with consumption as the main driver, supported by factors like tax cuts, festival demand, rural income gains, and the Eighth Pay Commission rollout. Structural tailwinds from AI, manufacturing incentives, and green hydrogen are expected to boost productivity, while trade diversification efforts help counteract US tariffs.
