The year 2026 could be a game-changer for India despite ongoing geopolitical uncertainty and rapidly evolving economic dynamics. Economic growth forecasts from global financial institutions point to improving near-term growth prospects, offering cautious optimism for the year ahead. The major fillip came in the form of the finalisation and signing of the India–European Union Free Trade Agreement.
World Bank – The World Bank recently released its Global Economic Prospects: January 2026. According to the report, in India, growth is estimated to increase to 7.2 per cent in FY2025/26 (April 2025 to March 2026), as domestic demand has remained robust, reflecting strong private consumption, supported by earlier tax reforms and improvements in real household earnings in rural areas. Alongside resilient services exports, merchandise exports rose in November, despite increases in US import tariffs on many Indian goods. This partly reflects buoyant demand from the United States and other trading partners, supported by efforts to diversify export markets to increase resilience. On the other hand, growth is projected to slow to 6.5 per cent in FY2026/27. This assumes that the United States’ 50 per cent import tariffs remain in place throughout the forecast horizon. Even so, India is expected to maintain the fastest growth rate among the world’s largest economies. Despite higher tariffs on certain exports to the United States, which accounts for about 12 per cent of India’s merchandise exports, the growth forecast has remained unchanged relative to June projections (as previously reported by the Asia Law Portal), primarily because adverse impacts of higher tariffs will be offset by stronger momentum in domestic demand and more resilient exports than previously anticipated. Growth is set to inch up to 6.6 per cent in FY2027/28, underpinned by robust services activity, as well as a recovery in exports and a pickup in investment.
International Monetary Fund – The International Monetary Fund recently released its World Economic Outlook January 2026 Update titled Global Economy: Steady amid Divergent Forces. According to the report, India’s growth is revised upward by 0.7 percentage points to 7.3 per cent for 2025, reflecting a better-than-expected outturn in the third quarter and strong momentum in the fourth quarter. The IMF’s October 2025 World Economic Outlook (WEO) report, covered by Asia Law Portal here, projected 6.6 per cent growth for 2025. Further, according to the current report, growth is projected to moderate to 6.4 per cent in 2026 and 2027 as cyclical and temporary factors wane. Inflation in India is expected to return to near-target levels after a marked decline in 2025, driven by subdued food prices. Further, global growth is projected at 3.3 per cent for 2026 and 3.2 per cent for 2027, revised slightly up since the October 2025 World Economic Outlook. Technology investment, fiscal and monetary support, accommodative financial conditions, and private-sector adaptability offset the impact of trade policy shifts.
UN Report – The United Nations Department of Economic and Social Affairs recently published its World Economic Situation and Prospects 2026 report. The report mentions that growth in India is estimated at 7.4 per cent for 2025 and forecast at 6.6 per cent for 2026 and 6.7 per cent for 2027, supported by resilient consumption and strong public investment, which should largely offset the adverse impact of higher United States tariffs. Resilient private consumption, strong public investment, recent tax reforms, and lower interest rates are expected to support near-term growth. However, higher US tariffs could weigh on export performance in 2026 if current rates persist, as the US market accounts for about 18 per cent of India’s total exports. While tariffs may adversely affect some product categories, key exports such as electronics and smartphones are expected to remain exempt. Moreover, strong demand from other major markets, including Europe and the Middle East, is projected to offset the impact partially. On the supply side, continued expansion in the manufacturing and services sectors will remain a key driver of growth throughout the forecast period.
Moody’s Ratings – Moody’s Ratings recently projected that India will record a robust economic growth of 7.3 per cent in the current fiscal year, underlining the country’s position as one of the fastest-growing major economies globally. The rating agency said the strong pace of expansion would play a critical role in lifting average household incomes and, in turn, support rising demand for insurance and other long-term financial protection products. According to Moody’s, sustained economic momentum, driven by domestic consumption, public infrastructure spending and steady private investment, is gradually improving income visibility for households across both urban and rural India. As employment conditions stabilise and wage growth improves in several sectors, households are expected to allocate a higher share of their disposable income towards financial security, including life, health, and general insurance products. The agency noted that rising awareness of risk protection, reinforced by recent experience, is also contributing to this structural shift in household behaviour.
India–European Union Free Trade Agreement – India and the European Union (EU) recently announced the conclusion of negotiations for a Free Trade Agreement (FTA), an important milestone in one of India’s most strategic economic partnerships. Designed as a modern, rules-based trade partnership, the FTA addresses contemporary global challenges while enabling deeper market integration between the world’s second – and fourth-largest economies. With a combined market estimated at over INR 2091.6 Lakh Crore (approximately USD 24 trillion), bringing unparalleled opportunities for the 2 billion people of India and the EU, the FTA unlocks significant potential for trade and innovation. The FTA delivers unprecedented market access for more than 99% of India’s exports by trade value, while preserving policy space for sensitive sectors and reinforcing India’s developmental priorities.
