FPJ News Service mumbai

Despite external headwinds, India’s growth is expected to remain robust, supported by favourable domestic conditions. Under the baseline assumption of prolonged 50% US tariffs, real GDP is projected to grow at 6.6% in FY25-26 before moderating to 6.2% in FY26/27, according to the International Monetary Fund’s 2025 Article IV Consultation for India, released on Wednesday. India’s economy has continued to perform well. Following economic growth of 6.5% in FY24-25, real GDP expanded by 7.8% in the first quarter of FY25-26.

“Headline inflation has declined markedly, driven by subdued food prices. The financial and corporate sectors have remained resilient, supported by adequate capital buffers and multi-year low non-performing assets. Fiscal consolidation has advanced, and the current account deficit has been contained, supported by resilient service exports,” the report said.

GST reforms and the resulting reduction in the effective rate are expected to help cushion the adverse impact of tariffs. Headline inflation is projected to remain well contained, reflecting the one-off effect of the GST reform and continued benign food prices. Looking ahead, India’s ambition to become an advanced economy can be supported by advancing comprehensive structural reforms that enable higher potential growth.

There are significant near-term risks to the economic outlook. On the upside, the conclusion of new trade agreements and faster implementation of structural reform domestically could boost exports, private investment, and employment. On the downside, further deepening of geoeconomic fragmentation could lead to tighter financial conditions, higher input costs, and lower trade, FDI, and economic growth.