In a testament to India’s economic resilience, the Economic Advisory Council to the Prime Minister (EAC-PM) Chairman S Mahendra Dev projected a robust 6.5% GDP growth for the fiscal year 2025-26 (FY26), despite global geopolitical tensions and trade policy uncertainties. In an interview with PTI on July 15, 2025, Dev highlighted domestic tailwinds such as low inflation, three consecutive Reserve Bank of India (RBI) rate cuts, and increased government capital expenditure as key drivers of this growth. This optimistic forecast, aligning with India’s Viksit Bharat 2047 vision, underscores the nation’s ability to navigate a challenging global environment while maintaining its position as the fastest-growing major economy.
A Resilient Economy Amid Global Headwinds
India’s projected 6.5% GDP growth for FY26 comes despite significant global challenges, including geopolitical tensions and trade policy uncertainties, such as the U.S.’s 10% reciprocal tariffs on Indian goods, with potential escalation to 26–28% by year-end if unresolved. Dev emphasized that India remains the fastest-growing large economy, with high-frequency indicators for April and May 2025 showing resilient domestic performance. “There are significant global headwinds like the twin shocks of geopolitical tensions and trade policy uncertainties. However, the Indian economy is resilient,” he stated, citing sound fiscal management and robust medium-term growth prospects.
The International Monetary Fund (IMF) and World Bank have slightly lower projections at 6.2% and 6.3% respectively, citing global trade tensions and a slowdown in exports due to weaker demand, particularly from the U.S., India’s largest export market. In contrast, the RBI, EY, and S&P Global Ratings align with Dev’s 6.5% forecast, while Deloitte projects a slightly higher 6.6%. These variations reflect the uncertainty posed by global factors, but Dev’s confidence stems from domestic strengths that are expected to offset external pressures.
Domestic Tailwinds Driving Growth
Several domestic factors underpin India’s projected growth. Low inflation, with CPI headline inflation at 2.1% in June 2025—the lowest since January 2019—and food inflation at -1.06%, provides a stable economic environment. The RBI’s projection of 3.7% inflation for FY26, supported by a normal monsoon, further bolsters this stability. Three consecutive rate cuts and a reduction in the Cash Reserve Ratio (CRR) have created a benign interest rate regime, encouraging investment and consumption.
Increased government capital expenditure, a key focus of the 2024-25 Budget, is expected to have a multiplier effect, spurring private investment and boosting both rural and urban demand. Dev noted that infrastructure projects like national highways and rural roads have already enhanced business activity, with “green shoots” of private capital expenditure (capex) emerging in sectors like energy, transportation, metals, chemicals, and hospitality. He urged corporate India to invest rather than hoard cash, stating, “Many firms turned debt-free and doubled their cash on the books. India Inc has to make new investments instead of keeping the cash.”
The Economic Survey 2024-25, cited by Dev, emphasized deregulation and easing compliance burdens to improve the ease of doing business, particularly at the state level. This aligns with India’s long-term goal of becoming a developed economy by 2047, requiring sustained reforms in land, labor, and education sectors. Finance Commission Chairman Arvind Panagariya echoed this optimism, noting that India’s per capita income must grow at 7.3% annually to reach $14,000 by 2047, a target achievable given India’s 7.8% average growth in real dollar terms from 2003–20.
FDI and Private Investment Dynamics
Foreign Direct Investment (FDI) inflows rose 14% in FY25, despite a moderation in net FDI due to increased repatriation and net outward FDI. Dev described this as a sign of a mature investment ecosystem, stating, “Unless you enable exit, the country can’t attract investment.” The World Investment Report 2025 reported global FDI inflows of $1,509 billion in 2024, a marginal 3.7% increase from the previous year but significantly lower than the $2,219 billion peak in 2015. Despite global FDI slowdown, India remains an attractive destination, with non-resident deposits and external commercial borrowings recording higher net inflows in FY25 compared to FY24.
However, private investment remains cautious due to global uncertainties and overcapacity in countries like China. Dev noted that rising rural and urban demand, coupled with clarity on trade tariffs, could unlock further private capex. “Hopefully, private capex will be more once domestic demand increases further and global uncertainties are reduced,” he said, emphasizing the need for state-level reforms to enhance the ease of doing business.
Trade Negotiations and Global Positioning
India’s proactive approach to trade negotiations, as highlighted by Dev in a separate interview with The Economic Times, reflects its commitment to national interests. Negotiations with the U.S., UK, New Zealand, Oman, Chile, Peru, and the EU aim to boost exports and secure strategic advantages. The proposed UK-India free trade agreement is expected to significantly enhance trade, particularly if tariff concerns are resolved. Dev stressed that India is negotiating “on its own terms,” prioritizing domestic agriculture and industry while leveraging global opportunities.
The U.S.’s reciprocal tariffs, currently at 10% but potentially rising to 26–28%, pose a risk to India’s export-oriented sectors like chemicals, textiles, and electronics. However, Finance Secretary Ajay Seth expressed confidence in India surpassing IMF projections, citing macroeconomic stability and domestic stimulus measures like tax cuts. Confederation of Indian Industry (CII) President Sanjiv Puri also projected 6.5% growth, advocating for a three-tier tariff structure to enhance competitiveness and bilateral trade agreements to counter global protectionism.
Alignment with Viksit Bharat 2047
The 6.5% growth projection aligns with India’s Viksit Bharat 2047 vision, which aims to transform the country into a developed economy by its centennial independence. Dev’s emphasis on fiscal consolidation, infrastructure investment, and reforms in education and emerging technologies like AI and generative AI reflects a strategic roadmap for sustainable growth. The Production-Linked Incentive (PLI) scheme’s expansion is seen as a vital lever to boost manufacturing and exports, further supporting India’s long-term economic goals.
India’s resilience is evident in its ability to weather global shocks, including the 2008 financial crisis, COVID-19, and banking sector challenges. With agriculture and services performing strongly and manufacturing expected to improve, Dev highlighted that “these tailwinds may raise both rural and urban demand by raising investment, consumption, and some push to exports.” This optimism is echoed in posts on X, where users praised India’s economic resilience and Dev’s forecast as a sign of “Bharat’s unstoppable growth.”
Challenges and Opportunities
Despite the positive outlook, challenges remain. Geopolitical uncertainties and tariff tensions could raise commodity prices, impacting inflation. The moderation in export growth due to weaker global demand, particularly from the U.S., requires careful navigation of trade agreements. Additionally, sluggish rural consumption and election-related uncertainties in early 2024 have tempered growth, though recent tax concessions and rising real incomes are expected to boost demand.
Opportunities lie in leveraging India’s strong financial sector, with non-performing loans at multi-year lows, and robust service exports, which have kept the current account deficit in check. The government’s focus on infrastructure, coupled with state governments attracting domestic and foreign investment, creates a conducive environment for growth. Dev noted that “industry is positive about India’s growth story,” with banks and corporates reporting healthy balance sheets.
A Bright Economic Future
India’s projected 6.5% GDP growth for FY26, as articulated by EAC-PM Chairman S Mahendra Dev, reflects a resilient economy poised to thrive despite global challenges. Driven by low inflation, RBI rate cuts, and increased government capex, India is leveraging domestic strengths to maintain its status as the fastest-growing major economy. Strategic trade negotiations, private investment revival, and alignment with Viksit Bharat 2047 goals position India for sustained growth.
As Dev emphasized, “India’s medium-term growth prospects seem to be robust with sound fiscal management.” By addressing global uncertainties through reforms and strategic investments, India is not only navigating a complex economic landscape but also laying the foundation for a developed, inclusive economy by 2047. This forecast, supported by domestic tailwinds and a proactive policy framework, signals a promising future for India’s economic journey.
