India Projected to Grow 6.6% in FY26 Despite Global Economic Uncertainty

New Delhi: India’s economy is expected to grow by 6.6% in FY26, close to its long-term trend, driven by stronger consumption demand supported by recent monetary easing, income tax cuts, favorable monsoon conditions, and the continued possibility of low oil prices, according to a report released Tuesday.

Standard Chartered’s global outlook projects India’s GDP growth to slightly improve from 6.5% in FY25 to 6.6% in FY26. The report highlights India’s strong macroeconomic fundamentals as a stabilizing force, though it also warns that risks remain, particularly from global trade tensions and the outcome of ongoing negotiations with the US and EU.

The positive forecast for India comes even as Standard Chartered has marginally downgraded its global growth outlook for 2025 to 3.1% from the earlier estimate of 3.2%, citing persistent trade policy uncertainty.

Anubhuti Sahay, Head of India Economic Research at Standard Chartered, expects real purchasing power to rise in FY26. However, she added, “While urban demand should stay resilient due to countercyclical measures, some households may choose to use the gains from lower interest rates and tax relief to reduce debt and increase savings.”

Sahay also emphasized the importance of fiscal discipline in India’s growth trajectory. “A combined fiscal deficit sustainably below 7% of GDP is a key criterion for a potential rating upgrade, as noted by S&P when it revised India’s sovereign rating outlook to positive in 2024. FY26 is set to be the first year that this benchmark is met, and we see a high likelihood of it being sustained in the medium term.”

On the global front, the report outlines increasing downside risks for the US economy in the second half of 2025, following stronger-than-expected performance in the first half. The inflationary effects of US tariffs are expected to limit the Federal Reserve’s room for monetary easing. While the bank forecasts one more 25 basis-point rate cut in 2025, it also sees a possibility of a larger 50 bps cut in September.

For China, the report anticipates a continued slowdown in trend growth. Although tensions from the US-China trade war appear to be easing, China’s economy remains vulnerable to higher effective tariffs. The report warns that export growth, which has been a vital post-COVID-19 driver, could decline significantly by late 2025.

With inputs from IANS