Financial and Monetary Measures Could Increase Growth to Top Range of 6.3-6.8% Forecast: Finance Ministry
India’s Economic Forecast for FY26: Projected Growth of 6.8%
The Finance Ministry of India predicts that the nation’s economic growth for FY26 could reach 6.8%, bolstered by tax concessions, reductions in the Reserve Bank of India’s interest rates, and a favorable investment climate. The anticipated US-India trade agreement, increased consumption levels, and overall macroeconomic stability are expected to further invigorate the economy.
As highlighted in the report, India solidifies its position as the fastest growing major economy, experiencing the least downward adjustments compared to other global economies according to assessments from various international agencies. The recent direct tax relief measures and fiscal strategies implemented by the government, along with the interest rate cuts from the Reserve Bank of India, are projected to enhance both consumption and investment, propelling FY26 growth toward the higher range of the 6.3% to 6.8% forecast detailed in the latest Economic Survey.
Positive Economic Indicators Amid Global Challenges
The Finance Ministry’s monthly economic review for April indicated that a successful bilateral trade agreement between the US and India could transform current economic challenges into opportunities, facilitating new market access and invigorating export activities. It is anticipated that an interim trade agreement could be established before July 8, with India’s government advocating for a complete exemption from the 26% reciprocal tariff on its products. Following the US’s implementation of this additional tariff on Indian goods on April 2, it was placed on hold for 90 days until July 9, although the original 10% baseline tariff remains enforced.
Investment Potential and Tax Reforms
The report underscores India’s potential to maintain its status as an attractive investment destination amidst global economic uncertainties. The fiscal budget for FY26 significantly increased the income tax exemption threshold from Rs 7 lakh to Rs 12 lakh under the new tax regime, a move expected to put approximately Rs 1 lakh crore back into the hands of taxpayers, which should stimulate consumption and demand within the economy.
In its monetary policy committee meeting on April 9, the RBI reduced the repo rate by 25 basis points to 6%, cumulatively lowering it by 50 basis points in the last two meetings. Positive responses from foreign direct investors are anticipated as the government unveils policies aimed at enhancing the medium-term growth prospects of the country. Specifically, initiatives that improve the skills and productivity of India’s young workforce are seen as vital to reinforcing the investment and growth cycle.
Robust Economic Foundations Amid Inflation Control
The report reiterates that India remains the fastest-growing major economy and has experienced minimal cuts compared to other economies, as noted by various global organizations. Multiple agencies forecast India’s growth in FY26 to be between 6.3% and 6.7%, underpinned by strong domestic fundamentals, effective macroeconomic governance, and increasing government capital expenditures, all while the declining inflation rates bolster this positive outlook.
According to the report, as of April 2025, India’s economy is characterized by solid domestic fundamentals, prudent macroeconomic policies, and the ability to endure external shocks.
