New Delhi [India]: Despite subdued growth in the current financial year, the Indian economy is projected to expand by 6.8% in FY26, supported by strong high-frequency indicators, according to a report by Bank of Baroda.
The report forecasts nominal GDP growth of around 10.5% for FY26, citing key factors such as robust air passenger traffic, a rise in the Services PMI, and increased GST collections. Additionally, higher rabi crop sowing is expected to provide a boost to agricultural growth, creating a stable foundation for the overall economy.
“For FY26, we expect the nominal GDP growth at 10.5% and real GDP growth at 6.8%,” the report stated.
It also highlighted the resilience of the Indian economy, driven by strong festive demand and steady improvements in economic activity, as reflected in the uptick of high-frequency indicators in the third quarter of FY25. The report emphasized that investment and consumption would continue to play a crucial role in sustaining growth momentum in the coming months.
However, the report also pointed out potential downside risks stemming from global economic uncertainties. A particular concern is the threat of a tariff war as the incoming US administration under President Trump could impose protectionist trade policies, which might disrupt global trade and trigger retaliatory actions, affecting global economic stability.
“A range of economic and strategic risks prevails post the imposition of tariff policies by the incoming US President Mr. Trump. This could have a far-reaching impact on global trade,” the report warned.
On the domestic front, attention will shift to key economic events such as the Union Budget, corporate performance in the third and fourth quarters, and the Reserve Bank of India’s (RBI) monetary policy decisions. The report anticipates a rate cut by the RBI in its February 2025 monetary policy meeting, which could further support economic growth.
“Focus would also move towards the Union Budget, corporate performance in Q3 and Q4, and RBI’s rate decision. We expect the rate cut action in the next meeting scheduled in Feb’25,” the report noted.
Overall, while global challenges persist, the Indian economy is expected to maintain steady growth, bolstered by strong domestic demand and improving economic indicators. The year ahead will be pivotal in managing global uncertainties while leveraging domestic strengths to sustain the growth momentum.