India Projects 7% GDP Growth Amid Global Risks
Owen LiIndia forecasts robust domestic-led economic growth, navigating global headwinds with strategic reforms and an undervalued rupee.
India's economy is on track to grow between 6.8% and 7.2% in the fiscal year beginning in April, propelled by strong domestic demand even as global volatility presents significant headwinds.
The projection, detailed in the government's annual economic survey, marks a slight moderation from the current fiscal year's estimated 7.4% growth. Presented to parliament by Finance Minister Nirmala Sitharaman, the report strikes a tone of cautious optimism, forecasting "steady growth amid global uncertainty."
The government's assessment for the current year at 7.4% notably surpasses the 6.3%-6.8% range predicted in last year’s survey.
Navigating External Economic Pressures
While the domestic outlook is robust, the report acknowledges that global conditions introduce considerable uncertainty. Key external risks threatening India's economy include:
• Slower growth among major trading partners.
• Trade disruptions stemming from international tariff policies.
• Volatility in capital flows that could affect exports and investor sentiment.
The report, authored by Chief Economic Adviser V. Anantha Nageswaran and his team, positions these challenges as sources of uncertainty rather than immediate macroeconomic distress.
US Tariffs and the Undervalued Rupee
The survey directly addresses the impact of global trade tensions, particularly with the United States. In August, President Donald Trump imposed a 50% tariff on certain Indian goods, prompting New Delhi to accelerate efforts to diversify its export markets through new trade deals with the European Union, New Zealand, and Oman.
Since the tariffs were introduced, the Indian rupee has fallen 5%, hitting a record low of 91.9850 per dollar on Thursday.
The economic survey argues that the currency is now "punching below its weight." The report states that the rupee's valuation does not align with India's strong economic fundamentals. However, this "undervalued" status provides a partial buffer against the impact of higher U.S. tariffs on Indian exports.
This currency weakness comes with a trade-off. While beneficial for exporters and manageable during a period of low inflation, it has made foreign investors hesitant. This reluctance led to a record withdrawal of $19 billion from Indian equities in 2025, with foreign investors continuing to be net sellers in January.
Domestic Reforms to Drive a Resilient Economy
To counter external pressures, the government is relying on a series of domestic reforms to stimulate investment and consumption. The survey highlights recent policy changes expected to strengthen the economy, including consumption-tax cuts, a comprehensive overhaul of labor laws, and measures to open up the nuclear power sector.
Furthermore, the report expresses optimism that "ongoing trade negotiations with the United States are expected to conclude during the year," which could help reduce uncertainty on the external front.
International Consensus on India's Growth Story
The Indian government's growth forecast is broadly in line with projections from major international institutions.
The International Monetary Fund (IMF) recently raised its growth forecast for India for the upcoming fiscal year to 7.3%. Similarly, the World Bank upgraded its projection to 7.2%.
Domestically, the Reserve Bank of India (RBI) has noted that high-frequency indicators point to sustained demand. The central bank has actively supported growth by cutting interest rates by 125 basis points since February 2025, its most aggressive easing cycle since 2019.
