Deloitte pegs India’s FY26 growth at 6.7–6.9% on strong demand, policy reforms

New Delhi: India’s economy is likely to grow 6.7-6.9% this financial year, driven by buoyant domestic demand, steady policy reforms, and a revival in private investment, consultancy firm Deloitte said on Thursday.

The firm raised its FY26 forecast from 6.5% estimated earlier, reflecting stronger-than-expected momentum in consumption and investment.

“Deloitte India forecasts GDP growth between 6.7% and 6.9%, averaging 6.8% this fiscal year, up by 0.3 percentage points from its previous estimate,” Deloitte India said in a statement.

Its latest India Economic Outlook report said that moderating inflation and improving consumer sentiment, particularly in rural areas, are expected to sustain spending, while structural measures, such as the proposed GST 2.0, will reinforce medium-term growth prospects.

“This performance signals not just resilience but a renewed sense of India emerging stronger than most nations. Similar growth rates are expected next year, though the variation may be wider given uncertainties around trade and investment,” it added.

To be sure, India’s real GDP growth outperformed expectations in the June quarter of 2025 (Q1FY26), accelerating to 7.8% year-on-year, driven by strong private consumption and investment amid lower-than-expected inflation.

Consumption is expected to have increased during the festive season in the October-December quarter (Q3FY26) on the back of GST rate rationalisation and improving consumer sentiment.

“Demand during the festive quarter will likely be fueled by a notable rise in consumption spending. This is expected to be followed by strong private investment, as businesses respond to uncertainties and prepare to meet elevated demand,” said Rumki Majumdar, economist, Deloitte India.

There is also anticipation that India will strike a deal with the US and the EU by the end of the year, which is expected to elevate overall investment sentiments. "Strong growth in the first and third quarters is likely to drive overall annual growth,” she added.

The consultancy firm also highlighted India’s track record of turning crises into reform opportunities and identified micro, small, and medium enterprises (MSMEs) as the next growth frontier.

Sounding cautious

Deloitte’s latest report also struck a note of caution, warning that global headwinds, including trade frictions and supply-chain disruptions, as well as persistently high borrowing costs in advanced economies, could temper growth momentum in the months ahead.

“India is no island, and global risks will inevitably weigh on its economic outlook. While years of policy efforts have helped bring down headline inflation—largely due to easing food and fuel prices—core inflation remains stubbornly high, consistently above 4% since February,” said Majumdar, adding that such persistent price pressure could constrain the Reserve Bank of India’s ability to pursue further rate cuts.

“Moreover, if the US Federal Reserve maintains elevated policy rates for an extended period, it could tighten global liquidity conditions, further limiting the RBI’s monetary flexibility. Such a scenario may also accelerate capital outflows from emerging markets like India, a trend already visible in recent months”, she added.

Growing optimism

Other global institutions are also optimistic about India’s economic outlook. The World Bank, Fitch Ratings, and other agencies have recently raised their growth projections for FY26, citing resilient domestic demand, policy reforms, and steady investment momentum.

In its South Asia Development Update released in October, the World Bank lifted India’s FY26 growth forecast to 6.5%, up from 6.3% in June, pointing to stronger consumption, better agricultural output, and rising rural wages. “India is expected to remain the world’s fastest-growing major economy, underpinned by continued strength in consumption growth,” the report said.

“Domestic conditions, particularly agricultural output and rural wage growth, have been better than expected,” it added.

However, the World Bank has trimmed its FY27 estimate for India to 6.3%, warning that steeper-than-expected US tariffs could weigh on exports.

Fitch Ratings is even more upbeat, projecting 6.9% growth, citing momentum in services and resilient household and government spending.

The Reserve Bank of India’s projection stands slightly lower at 6.8%, supported by robust consumption, investment, and public expenditure, aided by an above-normal monsoon and the upcoming GST rate rationalisation.

The OECD expects growth at 6.7%, noting the strength of domestic demand and a stable external sector, while S&P Global and the Asian Development Bank forecast 6.5%, with the ADB cautioning that new U.S. tariffs could pose modest headwinds for exports.