Deloitte Projects India's FY26 GDP to Hit 7.5%-7.8% on Pro-Growth Policies

Deloitte India projected India's Gross Domestic Product (GDP) growth to be in the range of 7.5% to 7.8% for the fiscal year 2025-26. This optimism stems from expectations of strong festive demand and robust activity within the services sector. The consultancy firm anticipates 2025 will be characterized by resilience, decisive policy actions, and adjustments in trade strategies.

Economic Outlook and Projections

For the subsequent fiscal year, 2026-27, Deloitte forecasts a moderation in growth, estimating it to settle between 6.6% and 6.9%. This expected slowdown is attributed to a higher base effect and persistent global economic uncertainties. Economist Rumki Majumdar, associated with Deloitte India, emphasized that India's economic resilience is not accidental but a direct outcome of sustained pro-growth policies.

Policy Drivers of Resilience

Majumdar detailed that early in 2025, global risks such as unpredictable trade policies and geopolitical tensions prompted decisive domestic action. Policymakers responded with tax exemptions, interest rate cuts, and Goods and Services Tax (GST) rationalization to stimulate demand. Favorable inflation trends and strategic trade recalibrations through Free Trade Agreements (FTAs) also bolstered exports.

Fiscal policy played a dominant role in the reform agenda, with tax relief measures directly increasing disposable incomes and reviving consumption. The Union Budget introduced direct tax exemptions for the middle-income segment, providing a significant boost. To counteract weak exports and support the informal economy, the government also announced GST slab rationalization just before the festive season, especially after U.S. tariffs impacted sectors like textiles and auto components.

Global Headwinds and Domestic Strengths

Rising incomes have fueled discretionary spending, complemented by a surge in public investment. Capital expenditure utilization reached 58.4% up to November of FY2025-26, a notable increase from 46.2% in the previous year, thereby driving gross fixed capital formation. Monetary policy supported these efforts, with the Reserve Bank of India (RBI) cutting policy rates to encourage credit growth and ease liquidity.

Domestic demand has proven to be the economy's primary shock absorber amidst weakening global economic conditions. Trade diplomacy has also seen a significant shift, with India signing key agreements with countries like the UK and Oman, and initiating negotiations with Israel, alongside the operationalization of the EFTA deal in 2025. These initiatives aim to diversify India's export markets.

Trade Diplomacy and Future Reforms

These partnerships are expected to unlock new manufacturing opportunities and expand India's services footprint beyond the U.S. They also reinforce investor confidence, potentially leading to increased Foreign Direct Investment (FDI), which is crucial for infrastructure and industrial expansion. Despite strong fundamentals, India faced challenges, including significant U.S.-imposed tariffs on its exports and substantial FPI outflows of $18.9 billion due to geopolitical uncertainties and stalled trade deal progress, leading to a historic breach of ₹91 per U.S. dollar in mid-December.

External risks are expected to remain elevated. Majumdar anticipates that the India-U.S. trade deal will conclude by the end of the current fiscal, which should help revive foreign investment and stabilize the currency. With demand-side levers largely addressed, policy focus in 2026 is expected to shift towards supply-side reforms, targeting Micro, Small, and Medium Enterprises (MSMEs) and fostering growth in tier-2 and tier-3 cities.