Indian Economy Set For Strong Growth In FY26, Q1 Indicates Positive Signs: CEA

The economy is forecast to expand between 6.3 and 6.8 per cent in FY26, propelled by a combination of domestic consumption, rural recovery, and strong services exports, CEA V Anantha Nageswaran said.

He added that falling crude oil prices could have a positive macroeconomic impact, potentially reducing the import bill, easing fiscal constraints, and supporting broader economic stability.

Source : Freepik

India’s economic trajectory remains positive as the country moves ahead into the first quarter of FY26, with growth projections signalling continued resilience. Chief Economic Advisor (CEA) V Anantha Nageswaran on Friday said that India’s GDP growth for FY25 stood at 6.5 per cent, underscoring the country's outperformance relative to many advanced economies across the globe.

Looking ahead, the economy is forecast to expand between 6.3 and 6.8 per cent in FY26, propelled by a combination of domestic consumption, rural recovery, and strong services exports, he added.

According to Nageswaran, a favourable uptick in urban consumption—fuelled by increased hiring, better salaries, and ongoing capital formation—could push growth toward the higher end of the projected band, reported Business Standard.

He pointed to the income tax relief introduced in the Union Budget for FY26 as a factor that would stimulate demand, alongside encouraging early data from April 2025 that reflects vibrant industrial and commercial momentum.

Resilience Amid Global Headwinds

Nageswaran emphasised the contrast between India’s growth path and the global economic context. “It’s important to understand that globally, this is a growth-scarce environment. In spite of rising uncertainties due to geopolitical conflicts and trade tensions — which predate 2025 — India is holding up its growth numbers better than many advanced economies,” he said.

Momentum from the final quarter of FY25 has spilled into the current quarter, he added, with high-frequency indicators reflecting sustained strength. The CEA highlighted that policy support, including the Reserve Bank of India’s interest rate moderation and government-led tax relief, is expected to further encourage consumption.

He also noted that private capital formation is likely to benefit from high capacity utilisation, though he acknowledged that private investment growth has remained modest. "Given that India has a large domestic economy, the private sector can definitely invest more. But how much it will ramp up in this current environment is difficult to say,” he remarked.

Policy Signals and External Factors in Focus

While commenting on the external environment, Nageswaran noted that there is no immediate funding risk for the Indian economy. However, he stressed the importance of enhancing foreign direct investment (FDI) by deepening integration with global supply chains and capitalising on the 'China plus one' manufacturing strategy.

He added that falling crude oil prices could have a positive macroeconomic impact, potentially reducing the import bill, easing fiscal constraints, and supporting broader economic stability.

Despite these strengths, Nageswaran cautioned about external financial risks. “Diverging central bank rate paths globally may impact capital flows and financial markets,” he said, adding that financial market volatility could introduce fresh uncertainties, with possible repercussions on growth.