The Indian economy’s outlook remains positive and continues on a growth trajectory, according to growth forecasts from global financial institutions. This reinforces the positive impact of current government policies and actions taken in the past few months. The economic and regulatory reforms continue to be implemented across various sectors. Proposals aim to increase foreign investment and improve India’s ease of doing business.
Asian Development Bank. The Asian Development Bank (ADB) recently published its Asian Development Outlook (ADO) September 2026 titled ‘Navigating Prolonged Energy Shocks and El Niño.’ According to the report, the Indian economy remains resilient despite heightened geopolitical tensions and high commodity prices. It is projected to grow at 7.0 per cent in fiscal year 2026 (FY2026, ending 31 March 2027), faster than expected in the ADO July 2026 (as covered by Asia Law Portal), reflecting strong momentum in investment demand and resilience in services exports. The growth forecast for FY2027 is downgraded to 7.1 per cent from the July projection because of the base effect of faster growth in FY2026. The inflation forecast for FY2026 is lowered to 5.0 per cent due to the limited pass-through of higher energy prices to consumers, and kept unchanged at 4.0 per cent for FY2027. The country’s external position is strong, helped by policy measures to attract capital flows. Geopolitical tensions and the impact of El Niño are the main risks to the outlook.
The services sector emerged as a major driver of growth, expanding by 10.0 per cent. The Reserve Bank of India (RBI, the central bank) cut the repo rate by 125 basis points between February and December 2025. As a result, the weighted average lending rate of scheduled commercial banks dropped by 80 basis points for fresh rupee loans and 91 basis points for outstanding rupee loans from February 2025 to June 2026. The RBI has kept the policy rate unchanged at 5.25 per cent since December 2025, as inflation has remained comfortably within its inflation target band of four per cent, plus or minus two percentage points, and 0.3 percentage points below its forecast for Q1 FY2026, despite the recent uptick in inflation driven mainly by supply-side measures. Government policy measures to make private investment more attractive will support corporate investment growth, especially through investments in logistics infrastructure, regulatory strengthening and a strong project pipeline.
Moody’s GDP Growth Forecast. Moody’s Ratings recently raised India’s real GDP growth forecast to seven per cent from six per cent for the current fiscal year, citing its resilience amid the Middle East conflict.
‘Although we continue to expect India to grow faster than all other G-20 economies, as well as similarly rated emerging market sovereigns, risks remain’, it said. The agency said elevated energy prices and El Niño-related food price pressures pose risks to inflation, consumption and growth.
Moody’s said India’s fiscal policy response to the Middle East shock had been muted. However, they warned that higher global energy prices could increase subsidy spending and pressure the government to provide additional support, while rising defence and infrastructure spending could constrain fiscal consolidation.
FDI in Agriculture. The government is considering liberalising foreign direct investment (FDI) norms in the plantation sector by bringing more commercial crops under the ambit. The Commerce and Industry Ministry is holding stakeholder consultations on the issue. Currently, 100 per cent FDI is permitted under the automatic route in the tea sector, including tea plantations, coffee, rubber, cardamom, palm, and olive oil tree plantations. Besides these, FDI is not allowed in any other plantation sector or activity. India has received $295.23 million in FDI in tea and coffee (processing and warehousing coffee), and $3.93 billion in rubber goods between April 2000 and March 2026.
FPI Access in Non-Farm Goods. The Securities and Exchange Board of India (SEBI) has approved a proposal to allow foreign portfolio investors (FPIs) to invest in physically settled non-agricultural commodity derivatives, along with a slew of other measures. Foreign investors would now be allowed to trade in non-agricultural index derivatives because such contracts are cash settled, regardless of the nature of their underlying commodities. FPIs currently have access to cash-settled non-agricultural commodity derivatives, while bullion and base-metal contracts are physically deliverable. For physically settled non-agricultural commodities, FPIs would have to square off positions before the start of the tender or staggered delivery period, three days before expiry. If they do not do so, open positions could be automatically transferred to a designated trading member or trading-cum-clearing member’s proprietary account. The move aims to improve foreign investor participation in India’s commodity markets, which would help boost volumes in the segment.
Insurance Sector Revamp. The Insurance Regulatory and Development Authority of India (IRDAI), through a recently released consultation paper, has proposed a sweeping overhaul of insurance distribution that could put pressure on insurers and distributors to reduce distribution costs and commissions, while giving policyholders greater choice when buying insurance. The proposals include tighter Expenses of Management (EoM) limits, a return to product-level commission caps, a ban on compulsory bundling of insurance with loans by banks and non-banking financial companies (NBFCs) and changes to motor insurance distribution. The draft reforms target areas where the regulator believes distribution costs are unnecessary. For instance, motor insurance commissions are very high, even though some parts are mandatory.
