Despite mounting global trade uncertainties, India’s economy is forecast to expand by 7.4% in the fiscal year ending March 2026, according to the government’s first advance estimates released Wednesday. This marks an acceleration from the 6.5% growth recorded in the previous fiscal year.

The projections come after a period of moderation, with growth initially estimated at 6.4% for 2025—the slowest pace since the pandemic—before being revised upward to 6.5% in May. Private consumption is expected to grow 7%, a slight dip from 7.2% last year, while government spending is projected to rise 5.2%, up sharply from 2.3%.

Trade tensions with the United States, India’s largest trading partner, pose a significant headwind. Since August last year, Indian exports to the U.S. have faced 50% tariffs, and while negotiations continue, the prolonged duties are likely to dampen economic momentum. The International Monetary Fund recently projected India’s real GDP growth at 6.6% in fiscal 2026, assuming a delayed U.S.-India trade agreement.

Nevertheless, India’s economy has shown remarkable resilience in the first half of fiscal 2026, growing 7.8% in the June quarter and 8.2% in the September quarter—both exceeding expectations. The Reserve Bank of India has upgraded its growth forecast for the fiscal year to 7.3%, from 6.8% previously, citing easing inflation.

With consumer price inflation now projected at 2.0%—down from 2.6%—the central bank cut its policy rate by 25 basis points to 5.25% last month, even as it noted softness in certain economic indicators. This supportive monetary stance, combined with robust domestic demand, underpins India’s optimistic growth outlook despite external trade risks.