India's Economic Growth Projection for FY26: Deloitte's Insight
Projected Growth Rate of India's GDP in FY26: 6.5-6.7% (As Per Deloitte)
Gearing up for the economic year ahead, Deloitte has predicted India's GDP growth to range between 6.5% and 6.7% in FY2025-26 (FY26). This forecast, presented in Deloitte's latest report, signifies a delicate balance between domestic stimulus measures and external trade uncertainties.
The Balancing Act
The catalyst for this growth will be two counteractive forces highlighted by Deloitte's India Economy Outlook:
- Tax-Powered Consumer Spending: Government incentives aimed at bolstering consumer spending, announced in the Union Budget 2025, are expected to pump a whopping ₹6.7–7.9 trillion into the economy [3][4].
- Trade Turmoil Threats: US tariff hikes on Indian exports, currently capped at 10%, and global trade tensions lurk around the corner, jeopardizing export competitiveness and potentially stunting growth [3][4].
Deloitte believes that India's ability to withstand these disruptions and capitalize on domestic consumption will keep the economic growth within the stipulated range [2][4].
Navigating the Economic Tides
With a tax incentive of Rs 1 lakh crore announced in the FY26 Budget, benefiting the middle class, higher economic activity is poised to counterbalance the decline in revenues, helping the government maintain its fiscal deficit target [2].
Deloitte's India Economist, Rumki Majumdar, points out that tax exemptions will bolster disposable income for young populations with higher income elasticity [2].
Regarding trade uncertainties, Deloitte forecasts that dependant on navigating the upcoming bilateral agreement, total reciprocal tariffs could oscillate between a high of 26% to a more moderate 10% [2].
In Majumdar's opinion, a successful negotiation with the US on a bilateral trade agreement could result in growth benefits, with potential tariff-induced setbacks ranging from 0.1-0.3%. A swift agreement would offer India new opportunities and a foothold amidst global trade uncertainties [2].
Embracing a bilateral trade agreement with the US by the fall would enable India to tap into the US market and fortify its position during challenging global trade scenarios [2].
[1] Deloitte predicts India's GDP growth at 6.3-6.5 per cent for FY25 and says that the economic outlook for FY26 hinges on a delicate balance between evolving trade relations and government efforts to boost domestic consumer demand.[2] Depending on India's ability to negotiate with the US and come up with a bilateral trade agreement quickly, trade tariffs may potentially shave 0.1-0.3 per cent off India's growth.[3] A bilateral trade agreement between India and the US by the fall, will help India find new opportunities and tap into the US market amidst global trade uncertainties, Deloitte said.[4] Deloitte on Thursday projected economic growth at 6.5-6.7 per cent for the current fiscal, as tax incentives provided in the Budget are expected to push domestic demand amid an uncertain global trade environment.
- The economic growth projection for FY26, as stated in Deloitte's report, suggests a delicate balance between fiscal measures like tax incentives and external trade uncertainties in the Indian business environment.
- Deloitte's India Economist, Rumki Majumdar, asserts that tax exemptions will increase disposable income for younger populations, who have a higher income elasticity.
- In the current global trade climate, Deloitte estimates that reciprocal tariffs could fluctuate between 10% and 26% based on the outcome of upcoming bilateral negotiations.
- Should India successfully negotiate a bilateral trade agreement with the US, the potential negative impact could be limited to 0.1-0.3% of India's growth, and the nation could seize new opportunities in the American market.
- If India signs a bilateral trade agreement with the US by the fall, it could fortify its position in the global market given the uncertain economic finance landscape.
