India Eyes 6.8% Growth Amid Global Jitters, But Volatility Looms: CEA
Pick up in urban consumption could help the economy reach the upper end of the projected growth band in FY26.
Chief Economic Adviser V Anantha Nageswaran on Friday reaffirmed the government’s fiscal 2026 growth outlook at 6.3–6.8%, citing resilient private consumption—especially a rural rebound—and strong services exports as key drivers. He said India’s economy remains robust despite global headwinds. However, he cautioned that renewed financial market volatility could add layers of uncertainty and potentially cast a shadow on the growth outlook.
“Amidst slowing global growth expected in 2025 and 2026, India faces relatively smaller forecast downgrades,” the CEA said in a media briefing on Q4 GDP numbers, underscoring that even the lower end of the projection is a robust performance in today’s geopolitical and geoeconomic climate.
While reiterating the government’s growth forecast, the CEA identified private consumption as a key driver, with global agencies also revising their India forecasts upward.
Multiple agencies project India’s growth to be in the range of 6.3–6.7% in FY26, he noted.
Urban Consumption Holds Key
Nageswaran stressed that continued momentum in FDI, capital investment, and a pickup in urban consumption could help the economy reach the upper end of the projected growth band.
He pointed to encouraging high-frequency indicators, a positive monsoon forecast, supportive inflation numbers, and growth-friendly monetary policy as factors reinforcing confidence in India’s economic momentum.
A notable highlight was his reference to the narrowing yield spread between India’s and the US' 10-year bonds—down by 170 basis points, sparking market chatter around India’s yield potentially falling below that of the US. “There’s a bit of greed and fear in the market,” he remarked, attributing the shift partly to fiscal discipline.
He further explained that food inflation remains benign due to a good rabi harvest, higher summer sowing, healthy procurement, and an above-normal monsoon. Exports remain robust, and forex reserves provide approximately 11 months of import cover.
The CEA also noted that declining crude oil prices will potentially lower import bills, create fiscal space, and alleviate external economic pressures.
According to Nageswaran, the diverging central bank rate paths globally may impact capital flows and financial markets.
