Deloitte predicts robust growth for India in 2025-26

Deloitte India has revised its GDP forecast for India’s financial year 2025-26, raising it by 30 basis points to 6.8%, reflecting strong growth momentum in the country’s economy. This upward revision comes on the back of India posting an impressive 7.8% GDP growth in the April-June quarter, significantly exceeding market expectations.

According to Deloitte India, the economy is expected to sustain similar growth in the subsequent fiscal year, although the range of variation may be broader due to global trade and investment uncertainties. “This performance signals not just resilience but a renewed sense of India emerging stronger than most nations. Similar growth rates are expected in the subsequent year, but the range of variation remains broader due to uncertainties associated with trade and investment,” the firm said in a statement Thursday.

Drivers of Growth :

Deloitte highlighted several key factors underpinning India’s growth outlook

• Domestic demand remains buoyant, supported by a strong rural consumer confidence index of 102–103, indicating optimism among rural households. Improved crop output is expected to boost farm incomes in the coming months.

• Accommodative monetary policy and structural reforms, such as GST 2.0, are expected to encourage investment and consumption. GST 2.0 reforms aim to simplify compliance, reduce tax rates for specific sectors, improve digital reporting, and enhance input tax credit processes.

• Low inflation is likely to support spending, as households enjoy greater purchasing power. While headline inflation has moderated due to easing food and fuel prices, core inflation remains persistently high at 4.1–4.3%, largely driven by services and manufacturing sectors.

Rumki Majumdar, Economist at Deloitte India, added, “Demand during the festive quarter will likely be fueled by a notable rise in consumption spending. This is expected to be followed by strong private investment, as businesses respond to uncertainties and prepare to meet elevated demand. There is also anticipation that India will strike a deal with the US and the EU by the end of the year, which is expected to elevate overall investment sentiment.”

Global Risks and Vulnerabilities :

Despite strong domestic indicators, Deloitte cautioned that India’s growth remains exposed to global headwinds. Key risks include:

• Escalating trade uncertainties and potential delays in securing trade deals with the United States and the European Union, which could affect exports and investment.

• Supply chain disruptions stemming from geopolitical tensions, including restrictions on critical minerals such as lithium, cobalt, and rare earth elements, essential for electronics, EV batteries, and high-tech industries.

• Western inflationary pressures and prolonged high interest rates in the US could tighten global liquidity, potentially triggering capital outflows from emerging markets like India.

Majumdar noted, “India is no island, and global risks will inevitably weigh on its economic outlook. While years of policy efforts have helped bring down headline inflation, persistent core inflation could constrain the Reserve Bank of India’s ability to pursue further rate cuts.”

Recent GDP Trends :

The upward revision comes amid a strong performance in the first quarter of FY 2025-26:

• Real GDP grew 7.8%, surpassing 6.5% in the same quarter of the previous fiscal year.

• Nominal GDP grew 8.8%, reflecting moderate inflation of around 1% during the period.

For context, India’s GDP growth over recent years has fluctuated due to domestic and global factors:

• 2021-22: 8.7% (post-COVID recovery)

• 2022-23: 7.2% (moderation due to supply chain shocks)

• 2023-24: 9.2% (strong domestic demand and export growth)

• 2024-25: 6.5% (slower growth amid global uncertainties and inflation)

Deloitte’s forecast for FY 2025-26, 6.7–6.9%, averages to 6.8%, marking a 0.3 percentage point increase from its previous estimate. Looking ahead, FY 2026-27 growth is expected to remain in the 6.7–7.0% range, though the uncertainty due to global trade and investment risks remains elevated.

Deloitte expects the combination of robust domestic consumption, supportive monetary policies, and structural reforms to sustain growth. The potential conclusion of trade agreements with the US and EU could further strengthen investment sentiment, while vigilance will be required to navigate global inflation, interest rate pressures, and supply chain risks.

In short, India enters FY 2025-26 on a high note, demonstrating resilience and optimism, even as global challenges loom on the horizon.