India’s Economy Estimated to Grow 6.8-7.2% Next FY

India’s economy is projected to grow between 6.8 and 7.2 percent in the next fiscal year beginning in April, according to the government’s Economic Survey 2025/26, tabled in Parliament on January 29. The projection is marginally lower than the estimated 7.4 percent growth for the current year.

The survey was authored by Chief Economic Advisor V. Anantha Nageswaran and released ahead of Finance Minister Nirmala Sitharaman’s presentation of the annual budget on Sunday, February 1. It notes that the economy expanded by 7 percent in the third quarter of the current fiscal year (October–December 2025).

India is on track to end the financial year with growth of 7.3%, cross $4tn (£2.97tn) in gross domestic product (GDP) and overtake Japan as Asia's second-largest economy, reported the BBC.

The survey reiterates that India remains the world’s fastest-growing major economy, attributing this resilience to structural reforms implemented over the past three years. Measures such as Production-Linked Incentive (PLI) schemes, liberalised foreign direct investment (FDI) rules and logistics reforms have strengthened manufacturing capacity. Public investment in physical and digital infrastructure, tax simplification and improved access to credit for micro, small and medium enterprises have further supported growth.

These reforms, combined with stronger corporate and financial balance sheets, higher job formalisation and improved tax administration, have lifted India’s medium-term potential growth rate to around 7 percent, the survey said.

The document also outlines three possible trajectories for the global economy in 2026. The worst-case scenario, assigned a 10–20 percent probability, could be more severe than the 2008 global financial crisis, driven by overlapping financial, technological and geopolitical shocks. One key risk identified is heavy investment in artificial intelligence infrastructure, which relies on optimistic timelines, a limited customer base and long-term funding. Any disruption in this sector could tighten global financing conditions, increase investor risk aversion and spill over into other markets.

The best-case scenario, with a 40–45 percent probability, assumes a continuation of current global conditions, though in a weaker and more fragile form. 

Another scenario, also with a 40–45 percent likelihood, warns of a “disorderly multipolar breakdown”, marked by rising global tensions, a prolonged Russia–Ukraine conflict and a weakening of international security frameworks.

Across all scenarios, the survey says India is relatively better positioned than many other economies. However, it cautions that disruptions in global capital flows could pressure the Indian rupee, with effects potentially lasting beyond a year. To offset such risks, the survey stresses the need to attract sustained investment and boost export earnings, noting that higher domestic incomes and production will inevitably lead to increased imports.

(With inputs from local media)