India is projected to maintain its position as the world’s fastest-growing major economy, with a Reuters poll forecasting a GDP growth of 6.4% for the fiscal year 2025–26. This follows an estimated growth of 6.5% in 2024–25. While the country continues to post impressive headline growth figures, economists caution that underlying structural issues remain unaddressed.
The latest projections indicate that the momentum will be largely sustained by strong government-led capital expenditure. However, private investment and job creation, particularly among the youth, continue to lag. Analysts note that per capita income remains stagnant, and income inequality is becoming more pronounced, which could hamper the long-term sustainability of economic expansion.
A key concern for the months ahead is the uncertainty surrounding trade negotiations with the United States. If a trade agreement is not reached before the July 9 tariff deadline, there could be negative implications for India’s export sectors. The delay in finalizing the deal is already prompting some economists to consider revising their growth outlook downward.
In terms of monetary policy, the Reserve Bank of India (RBI) has made significant interventions to stimulate growth. It has reduced the key repo rate by 100 basis points so far in 2025 and adopted a neutral policy stance in June, signaling a potential pause in further easing. Despite these efforts, consumer inflation is expected to remain contained, with forecasts averaging 3.6% for 2025–26 and rising modestly to 4.3% in 2026–27.
While the government’s fiscal push has supported growth, there are concerns over its long-term impact. The RBI’s aggressive liquidity measures and rate cuts have raised questions among analysts about the balance between short-term stimulus and inflationary risks.
The rural economy continues to show signs of resilience, bolstered by improving monsoon conditions and steady agricultural income. Rural consumption surged to 7.1% growth in the last fiscal year, and analysts expect this trend to support overall demand in the current fiscal.
Global ratings agencies and financial institutions have issued cautious optimism. ICRA maintains a 6.2% forecast for FY 2025–26, while S\&P has recently revised its forecast upward to 6.5%. The World Bank also estimates India’s growth at 6.3%, reaffirming its position as the top-performing major economy, albeit with increasing external risks such as geopolitical tensions and global oil price volatility.
India’s equity markets have seen a sharp rally in recent months, with increased activity in IPOs and secondary share sales. However, the momentum has sparked fears of overheating, as investor appetite shows signs of slowing. The Indian rupee has benefited from global dollar weakness and expectations of U.S. rate cuts, extending its rally through June.
Despite positive projections, economists agree that without stronger private sector participation, labor reforms, and targeted social investments, India’s growth path may not be sustainable in the long term. Policymakers are under pressure to convert short-term gains into structural improvements that can deliver broad-based economic prosperity.