India's economy demonstrates remarkable resilience in the current fiscal year, with strong growth momentum and controlled inflation creating a favorable macroeconomic environment. The combination of supportive monetary policy, fiscal measures, and robust domestic fundamentals positions the country for continued economic expansion despite global uncertainties.

Strong Growth Performance in H1

India's economic performance has shown significant improvement in the current fiscal year. GDP growth reached 8.00% in the first half, marking a substantial increase from previous periods. This acceleration reflects the effectiveness of policy measures and underlying economic strength.

The Reserve Bank of India has responded positively to these developments, with expectations of supportive policies to sustain the economic momentum.

Policy Support Driving Economic Momentum

Several key policy measures are anticipated to support India's economic resilience:

These measures are expected to offset potential headwinds from global economic challenges. The combination of rate cuts and liquidity infusion aims to sustain growth and maintain price stability.

Economic Outlook

The economic outlook for India remains positive, with expectations of continued strong performance:

• GDP growth of 8.00% in H1 indicates robust economic activity
• Inflation at 2.30% suggests price stability
• Anticipated policy support, including 125 bps rate cuts and ₹10.00 trillion liquidity infusion, is expected to sustain momentum

India's economic fundamentals remain solid, supported by effective policy coordination and strong domestic demand drivers. The sustainability of this favorable environment will depend on the gradual transition of policy support and the evolution of global economic conditions.

India's economy is expected to maintain its "Goldilocks" phase in 2026, characterized by growth above long-term trends and controlled inflation, though with less vigor than in 2025. According to a CNBC-TV18 poll of economists, this delicate balance may persist into the new year, albeit with some moderation across key economic indicators.

Growth Outlook Shows Mixed Signals

Economic growth is projected to ease in 2026, with economists forecasting GDP expansion of 6.80% compared to an estimated 7.50% in 2025. However, this consensus masks a divided outlook among experts.

Nominal GDP growth is expected to improve to 9.70% in 2026 from 8.30% in 2025. Despite this increase, half the respondents anticipate nominal growth remaining below 9.50%, significantly short of the previous decade's average exceeding 11%.

Inflation Expected to Normalize

After subdued levels in 2025, inflation is projected to normalize in 2026. The poll indicates CPI inflation may reach 4.00%, an increase from the 1.90% recorded in 2025.

Across all scenarios, economists expect consumption growth to outpace investment, with public capital expenditure slowing and private capex remaining cautious.

Fiscal Position and Debt Concerns

The government is expected to continue its fiscal consolidation path, with the fiscal deficit projected to narrow to 4.30% of GDP in 2026 from 4.40% in 2025. This trajectory aligns with the long-term consolidation roadmap.

A significant policy shift may emerge from the upcoming 16th Finance Commission report, potentially redirecting focus from fiscal deficit targets to overall debt-to-GDP levels. With India's debt currently around 84% of GDP, pressure is mounting to approach the 80% threshold over the medium term.

Bond Market Dynamics and Capital Flows

Government borrowing requirements are set to increase in 2026. The Centre and states are expected to raise at least ₹30.00 trillion through bonds and state development loans, representing an 8.50% increase from ₹27.70 trillion in 2025.

Most economists anticipate the RBI will maintain active participation in the bond market through open market operations to support demand absorption.

External Sector Stability with Capital Flow Challenges

India's external position is expected to remain relatively stable, with the current account deficit projected at 1.06% of GDP in 2026, largely unchanged from current levels. Strong services exports, particularly from global capability centres, and steady remittances continue providing support.

The capital account presents greater challenges. Foreign portfolio investors withdrew $15.00 billion in 2024 and an estimated $17.00 billion in 2025, creating balance of payments deficits. For 2026, economists forecast cautious optimism with net inflows of $7.00-8.00 billion, though projections range from potential inflows of $20.00 billion to barely positive flows.

Currency and Key Uncertainties

The rupee, which depreciated nearly 6% against the dollar in 2025 due to persistent capital outflows, is expected to stabilize. Economists project the currency will end 2025 at ₹90.40 per dollar and weaken marginally to around ₹92.00 per dollar by end-2026.

Two major uncertainties could significantly impact these projections:

1. The potential for an India-US trade deal, which economists consider crucial for sustaining growth and investor confidence.
2. Upcoming statistical revisions. The Ministry of Statistics is expected to unveil new GDP and CPI series with a revised 2022-24 base in February, potentially leading to significant revisions across economic indicators.