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India’s growth outlook for FY26 remains strong despite global uncertainties: Finance Ministry
Oct-28-2025

The finance ministry in its latest report has suggested that India’s growth outlook for FY26 remains strong, supported by domestic demand, lower inflation, monetary easing, and the positive effects of GST reforms despite global economic and trade policy uncertainties. It added that despite of global uncertainties, country’s economy gained momentum in Q2 FY26. Further, various supply-side High Frequency Indicators (HFIs) have displayed healthy trends while demand conditions continued to improve with the GST reforms and festive season sentiments spurring consumption. It highlighted that the IMF and the RBI have revised their FY26 growth forecasts for India upwards from 6.4% and 6.5% to 6.6% and 6.8%, respectively.

On the trade front, it said that India's trade performance remains robust, with strong services exports effectively offsetting the merchandise trade deficit. It noted that while trade deal negotiations with the US continue, the merchandise trade data for September 2025 has presented early evidence of diversification of export destinations. With regard to foreign investments, it said the increase in gross FDI inflows signals the country's appeal as an attractive investment destination. Besides, recent policy measures, including GST rate rationalisation, are expected to keep inflation moderate while supporting consumption demand. It added that the overall prices are likely to remain soft in FY26. Also, it noted that kharif sowing has been successfully completed, with cereals and pulses recording healthy growth, reflecting favourable growing conditions. On financial sector, it said despite a moderation in the growth of bank credit, the overall flow of financial resources to the commercial sector continues to rise as non-bank sources of funding are gaining prominence and offsetting the decrease in the flow of bank credit.

Looking ahead, it said the lower GST rate is expected to support a positive demand outlook by reducing the tax burden on consumers and businesses, stimulating consumption and investment across sectors and boosting employment generation in the economy. Besides, a strong performance in the industries and services sector, along with a stable labour market, will further enhance domestic demand. However, global uncertainties warrant caution and will continue to affect external demand, presenting downside risks to the growth outlook. The ministry added that the implementation of various growth-enhancing structural reforms and government initiatives, including GST 2.0, is expected to mitigate some of the negative impacts of these external challenges.

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