Growth Projection
- India’s economy is projected to grow at 6.5% in FY26.
- Growth driven by strong domestic demand despite global uncertainties (geopolitical issues, US-led trade actions).
Key Assumptions & Drivers
- Normal monsoon & stable commodity prices.
- Cooling food inflation expected to ease cost pressures.
- Tax benefits from the budget to boost consumption.
- Lower borrowing costs encouraging spending and investment.
Sectoral Outlook
- Manufacturing Growth: Expected to average 9% annually between FY25-FY31 (compared to 6% pre-pandemic).
- Manufacturing’s GDP share to increase to 20% by FY31, driven by investments and efficiency improvements.
- Services sector remains primary growth driver, albeit at a slower pace.
Economic Resilience
- India has built “safe harbours” against external shocks:
- Healthy economic growth.
- Low current account deficit & external public debt.
- Adequate forex reserves, providing policy flexibility.
- Short-term growth: Driven by urban and rural consumption.
- Medium-term growth: Supported by investments and efficiency gains.
Inflation Outlook
- Inflation softened in FY25, mainly due to lower non-food inflation.
- Food inflation remained high but is expected to decline further in FY26.
- This will help lower headline inflation and support economic stability.
Source: Mint
