Despite the persistent trade tensions and geopolitical instability, projections have showcased a favorable estimated GDP growth for India in FY26 in the range of 6.2 to 6.5 per cent. The trends have highlighted India’s steady momentum amid a turbulent global landscape, here are a few trends that reveal what the future holds for us.
As Per the June 2025 Monthly Economic Review, “The Indian economy in mid-2025 presents a picture of cautious optimism. Despite global headwinds marked by trade tensions, geopolitical volatility, and external uncertainties, India’s macroeconomic fundamentals have remained resilient. Aided by robust domestic demand, fiscal prudence, and monetary support, India appears poised to continue as one of the fastest-growing major economies, with various forecasters, including S&P, ICRA, and the RBI’s Survey of Professional Forecasters, projecting GDP growth rates for FY26 in the range of 6.2 per cent and 6.5 per cent.”
Inflation Rates Showcase the Possibility of Policy Support
The report details that core inflation remains subdued, and overall inflation is well below the RBI’s 4 per cent target, providing room for the monetary easing spree. The Reserve Bank of India has projected headline inflation at 3.4 per cent for Q2 of FY26, while actual inflation in Q1 came in below its target, suggesting that the full-year inflation rate may fall short of the RBI’s forecast of 3.7 per cent.
Adding to the favorable trends, global crude oil prices are expected to remain low, driven by a larger-than-expected output increase by OPEC and its allies.
Healthy Monsoon Boosts Agricultural Activity
Agricultural activity has been gaining momentum with profound progress in monsoon and Kharif sowing, supported by favourable rainfall as forecasted by the India Meteorological Department (IMD). The Southwest Monsoon covered the entire country on 29 June. The data in the report showcases that seed supply has exceeded the required 164.05 lakh quintals by 9%. Plus, fertilizer stocks are double the monthly requirement for July 2025. Such inputs ensure an uninterrupted and smooth progression of the Kharif sowing season.
External Factors That Can Impact Growth
Although geopolitical tensions have remained stable, the global economic slowdown – particularly the 0.5 per cent contraction in the US economy during Q1 2025 -poses a potential drag on demand for Indian exports. Ongoing uncertainty around US tariffs could further impact India’s trade outlook in the coming quarters.
Global Supply Chain Shifts: A Strategic Opportunity for India
The report elucidates that in the future, India would have to be vigilant about semiconductor chips and rare earth metals, and magnets to leverage a position in new emerging global supply chains. With the ever-growing need for rare earth metals, the nation has planned to catalyze local manufacturing and excavation initiatives by issuing production-linked schemes for manufacturers.
Caution Needed Towards Wholesale Deflationary Trend Going
While GDP estimates showcase the possibility of steady prospects, a wholesale deflationary trend can be a deterrent in the future. The report quoted that “inflation measured by the Wholesale Price Index (WPI) slipped into deflation, recording (-) 0.1 per cent for June 2025, indicating a downward trend in producer prices.” Such trends, if not corrected by fiscal and monetary policies, can lead to decreased investment incentives among business owners and further lead to recessionary trends.
Beyond the WPI deflationary trends, credit growth has decelerated as well, suggesting cautious sentiment among borrowers and possibly increased risk aversion among lenders. This could be another trend that the government would have to address as soon as possible. Credit growth has decelerated as well, suggesting cautious sentiment among borrowers and possibly increased risk aversion among lenders. The shift may also be attributed to a rising corporate preference for bond markets. This could be another trend that the government would have to address as soon as possible.
