India to grow at 7% in FY27 despite global uncertainties
What's the story
India's economy is projected to grow at a healthy rate of 7% in the fiscal year 2026-27, according to CareEdge Ratings. The growth momentum will be driven by factors such as low inflation, lower interest rates, and a reduced tax burden. Despite facing challenges such as tariff uncertainties impacting merchandise exports, strong services exports are expected to support India's external position.
Economic resilience
GDP growth for FY25-26 estimated at 7.4%
The Indian economy has shown relative resilience in the current fiscal year (FY) 2025-26, with a GDP growth estimate of 7.4%, according to the government's First Advance Estimate (FAE). This growth is attributed to several factors including income tax cuts, Goods and Services Tax (GST) rate rationalization, continued services export momentum, easing inflationary pressures, and Reserve Bank of India (RBI)'s rate cuts.
Future outlook
CareEdge's projections for India's GDP growth
For FY 2026-27, CareEdge has projected a real GDP growth of 7% and a nominal GDP growth of 10.1%. Sachin Gupta, Chief Rating Officer and Executive Director at CareEdge, said that as India enters 2026, the macroeconomic picture appears remarkably encouraging. He highlighted controlled inflation, reasonable interest rates, and a well-capitalized banking sector as positive indicators of India's economic health.
Emerging concerns
Challenges to India's economic growth
Despite the positive outlook, CareEdge also flagged some emerging challenges that need attention. One of these is the depreciation of the Indian rupee against major currencies such as the US dollar, British pound, and euro. The report also highlighted foreign investment trends with foreign portfolio investors witnessing net outflows of nearly $18 billion in 2025 and a sharp decline in net Foreign Direct Investment (FDI) over four years.
Investment challenge
India's ambition to become a developed nation
India's ambition to become a Viksit Bharat depends not just on strong domestic fundamentals but also on attracting long-term investments and competing in the global market. CareEdge cautioned that while the growth story remains intact for now, warning signs such as weak capital inflows, currency pressures, and rising trade barriers suggest that sustaining this momentum will require careful recalibration of economic strategy.