Economic Survey projects India's economy to grow at 6.8% to 7.2% in FY27

New Delhi: The pre-Budget Economic Survey released on Thursday projected GDP growth in the range of 6.8 per cent to 7.2 per cent for the fiscal year 2026-27, slightly lower than the 7.4% estimated for the current fiscal year. This growth projection accounts for the cumulative impact of recent policy reforms, which appear to have increased the economy's medium-term growth potential to around 7 per cent.

"The outlook is one of steady growth amid global uncertainty, requiring caution but not pessimism," stated the pre-Budget document presented in the Lok Sabha by Union Finance Minister Nirmala Sitharaman. The estimate of this fiscal year's growth at 7.4 per cent exceeds the previous forecast range of 6.3 per cent to 6.8 per cent from last year's survey.

"With domestic drivers playing a dominant role and macroeconomic stability well anchored, the balance of risks around growth remains broadly even," the document noted. For India, global conditions introduce uncertainties rather than immediate macroeconomic stress. Slower growth in key trading partners, tariff-induced trade disruptions, and volatility in capital flows could occasionally affect exports and investor sentiment, according to the report.

The growth assessment aligns with recent analyses of India's economic momentum by international agencies. This report serves as a precursor to the federal budget, which will aim to support rapid economic growth and safeguard the South Asian nation from geopolitical shocks and tariff uncertainties caused by the US, which have disrupted global trade.

In August, President Donald Trump imposed a 50 per cent tariff on certain Indian goods entering the United States. Since the announcement, the rupee has depreciated by 5 per cent and is currently described in the economic survey as "punching below its weight." The report concludes that the rupee's valuation does not accurately reflect India's strong economic fundamentals. However, the "undervalued" currency helps to mitigate the impact of the higher US tariffs on Indian goods.

The weaker rupee is not problematic at a time when inflation in India remains exceptionally low, but it "does cause investors to pause," the survey states, adding that "investor reluctance to commit to India warrants examination."

This Thursday’s report was authored by Chief Economic Adviso V Anantha Nageswaran and his team, who are distinct from those compiling the budget to be presented on Sunday. Investment and consumption are expected to strengthen as companies respond to recent reforms, including cuts in consumption taxes, an overhaul of labour laws, and initiatives to open up the tightly regulated nuclear power sector.

"Ongoing trade negotiations with the United States are expected to conclude during the year, which could help reduce uncertainty on the external front," the report indicated. The IMF has recently raised India's growth forecast for the upcoming fiscal year by 0.7 percentage points to 7.3 per cent, while the World Bank increased its forecast by 0.9 points to 7.2 per cent.

The Reserve Bank of India noted in its January bulletin that high-frequency indicators point to sustained demand as the new year begins. The central bank has cut interest rates by 125 basis points since February 2025, the most aggressive easing since 2019.
(With inputs from PTI, Reuters)