Deloitte is optimistic about India’s economic trajectory, predicting a growth rate between 6.5% and 6.7% for the financial year 2025-26. This positive outlook comes as other global financial institutions have downgraded their forecasts for various economies, highlighting India’s unique resilience amidst global challenges. Driven by robust domestic demand, Deloitte’s latest report suggests that Indian economic growth will remain stable even as global trade uncertainties loom.

Economic Growth Projections

In its India Economy Outlook released in May, Deloitte detailed the factors influencing India’s growth. The consultancy emphasizes that the country’s economic fortunes will hinge on two contrasting elements:

• Tax Incentives: Government measures aimed at boosting consumer spending.
• Global Trade Uncertainties: Ongoing challenges posed by international trade dynamics.

“The balance between these two forces could keep India’s growth within a range of 6.5% to 6.7% for the upcoming fiscal year,” Deloitte explained.

Global Comparisons and Revisions

The International Monetary Fund (IMF) recently adjusted its forecast for India’s growth to 6.2%, down from an earlier estimate of 6.5%. This revision aligns with similar downgrades from institutions like the Asian Development Bank and Moody’s Analytics, all citing global trade tensions as a significant concern, particularly in light of the U.S. tariff wars.

Impact of Tariffs and Trade Relations

In a notable development last month, U.S. President Donald Trump enacted a 27% reciprocal tariff on Indian imports, citing India’s high tariffs on U.S. goods. However, this tariff was temporarily reduced to 10% as both nations work toward a potential bilateral trade agreement. According to Rumki Majumdar, an economist at Deloitte India, the outcome of these negotiations is crucial.

“Indian exports to the U.S. are sensitive to pricing, while our imports are less so,” said Majumdar. “If tariffs remain high, it could reduce India’s growth by approximately 0.1% to 0.3%.”

Factors Influencing Economic Stability

Deloitte attributes India’s economic slowdown in FY25 to several factors, including political uncertainties due to elections, unexpected rainfall, and fluctuations in global trade. However, the government’s decision to implement income tax cuts, amounting to approximately ₹1 trillion, is expected to enhance disposable income for middle-class consumers, thereby boosting overall consumption.

Majumdar highlighted that these tax exemptions will particularly benefit the younger population, resulting in a potential GDP increase of 0.6% to 0.7% in FY26. She estimates that the “consumption multiplier” effect could generate between ₹6.7 trillion and ₹7.9 trillion in economic activity in the medium term.

Conclusion

In conclusion, lower inflation rates, stable global oil prices, and a conducive borrowing environment are set to improve consumer sentiment in India. With a favorable economic landscape, the interplay of domestic demand and global trade dynamics will be key to sustaining growth in the years ahead.

For further insights on India’s economic outlook, check out Deloitte’s full report here.