India’s GDP to grow 7.5-7.8% in FY26 over resilient domestic demand, strong services activity: Deloitte

Deloitte India projects that India’s GDP will expand by 7.5-7.8 per cent for the fiscal year 2025-26, driven by resilient domestic demand and strong services activity. The nation’s economic performance continues to stand out, with real GDP rising 8 per cent in the first half of FY2025-26 despite ongoing global headwinds including trade disruptions, policy changes in advanced economies, and volatile capital flows, the report said.

Growth may moderate to 6.6-6.9 per cent in FY2026-27, reflecting a high base and persistent global uncertainties, the report stated.

This growth comes as India faced significant challenges, such as record foreign portfolio investment outflows and currency depreciation, yet domestic reforms and festive demand have underpinned the positive outlook.

For India, 2025 was notable for “resilience” in domestic demand, decisive “reforms” in fiscal, monetary and labour policies, and “recalibrations” in trade policies. Policymakers implemented tax exemptions, policy rate cuts, and GST rationalisation to support consumption and boost economic activity, the report said. Favourable inflation trends also contributed to the overall economic buoyancy, while recalibration of trade through new free trade agreements diversified export markets, it said.

“India’s resilience is no accident. It stems from sustained pro-growth policies. Early in 2025, signals of external risks such as unpredictable trade policies, geopolitical tensions, and slowing growth among major partners prompted decisive action. Policymakers introduced tax exemptions, policy rate cuts, and GST rationalization to boost demand. Favorable inflation trends added buoyancy, while trade recalibration through multiple FTAs strengthened exports,” said Dr Rumki Majumdar, Economist, Deloitte India.

India also expanded its trade and investment ties, signing agreements with the UK, New Zealand, Oman, and initiating negotiations with Israel. The operationalisation of the EFTA deal in 2025 and partnerships across the Global South have reinforced investor confidence and facilitated increased foreign direct investment. Majumdar said these partnerships will unlock “manufacturing opportunities and expand India’s services footprint beyond the US, while reinforcing investor confidence and paving the way for increased FDI, which remains critical for financing infrastructure and industrial expansion”.

Despite strong fundamentals, 2025 presented notable risks. The country contended with one of the highest US-imposed tariffs on exports, reaching 50 per cent, alongside record FPI outflows of $18.9 billion and continued FDI repatriation. The rupee breached 91 per US dollar in December, and volatility persisted, with FPI outflows of Rs 10,586 crore reported through early January 2026. These external pressures are expected to remain a concern into 2026, it said.

“External risks remain elevated, though their full impact may not materialise in FY2025-26. However, in FY2026-27, growth may moderate reflecting a high base and persistent global uncertainties. We anticipate the India-US trade deal will conclude by the end of this fiscal, which should revive foreign investment and stabilise the currency,” said Majumdar.