Indian economy to grow 7.5-7.8% in FY2025-26: Deloitte
India’s economy is expected to grow 7.5-7.8 per cent in FY2025-26, supported by resilient domestic demand, easing inflation, and a series of fiscal, monetary, and labour reforms, according to the Deloitte Global Economics Research Centre’s report, ‘India Economic Outlook, January 2026.’ Growth is projected to moderate to 6.6-6.9 per cent in FY2026-27 as global uncertainties and trade frictions persist.
The global consultancy said 2026 will be defined by resilience in domestic consumption, decisive policy reforms, and recalibration of trade strategy, as India navigates spillover effects from protectionist shifts in advanced economies, volatile capital flows, and higher tariffs on select exports.
Despite these headwinds, India maintained strong momentum in the first half of fiscal 2025-26, recording 8 per cent growth, driven by robust private consumption and investment. Inflation averaged 1.8 per cent, its lowest level in a decade, boosting real incomes and consumer confidence.
Private consumption rose 7.9 per cent year-on-year (YoY) in the second quarter (Q2), supported by tax relief, goods and services tax (GST) rationalisation, and favourable monsoon conditions. At the same time, government capital expenditure accelerated, with utilisation reaching 51.8 per cent in the first half of the fiscal, lifting gross fixed capital formation growth to 7.6 per cent.
On the production side, gross value added (GVA) expanded 8.1 per cent in Q2, led by manufacturing growth of 9.1 per cent and services growth of 9.2 per cent.
Deloitte noted that policy co-ordination played a central role in cushioning the economy. Fiscal measures focused on boosting disposable incomes and sustaining infrastructure investment, while the Reserve Bank of India (RBI) delivered a cumulative 125-basis-point rate cut in 2025 to support credit growth and domestic demand. The long-pending labour codes, implemented in 2025, are expected to improve ease of doing business and accelerate job formalisation.
On the external front, India continued to diversify trade partnerships through agreements with the UK, New Zealand, Oman, and European Free Trade Association (EFTA), while expanding engagement with emerging markets across Africa, Southeast Asia, and West Asia. However, delays in the proposed United States (US)-India trade agreement remain a key risk for exporters.
Deloitte estimated that in the absence of a US-India trade agreement, American tariffs could shave 0.3-0.4 per cent of Gross Domestic Product (GDP) from Indian exports, likely keeping goods export growth subdued in the near-term.
Looking ahead, policy priorities must transition from demand-led support to supply-side reforms such as GST 2.0, improved logistics efficiency, and productivity gains to sustain growth and strengthen resilience against future global shocks, Deloitte noted.
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