India's economy to grow at 6-6.5% in FY26: UBS
What's the story
India's economy is tipped to grow at a steady rate of 6-6.5% year-on-year (YoY) in the fiscal year 2025-26, according to a recent UBS report. The growth is likely to be driven by strong domestic demand and the easing of global crude oil prices. The forecast comes despite concerns over recent tariff hikes and external risks that may affect growth momentum.
Economic stability
Immunity to global trade shocks boosts growth prospects
The UBS report highlights India's relative immunity to global trade shocks, especially when compared to other Asian economies that are more dependent on exports. This is due to the nation's lower goods trade exposure and a robust services export base, which now contributes nearly 47% of total exports. The report also notes that there could be room for more easing if inflation remains low and external risks dampen growth momentum.
Fiscal outlook
Fiscal drag expected to reduce
The UBS report also predicts a reduction in fiscal drag, with the Indian government likely to speed up its capital expenditure targets. This comes as retail diesel and petrol prices are expected to fall ahead of Diwali and Bihar state elections in October-November. The move could further boost household disposable income, giving an additional push to consumption.
Economic performance
Economy grew by 7.4% in Q4 FY25
India's economy grew by an impressive 7.4% in the January-March quarter (Q4) of FY25, beating expectations and also marking the strongest quarterly growth of the fiscal year. This was a significant jump from the 6.2% recorded in the previous quarter.