Under tariff pressure, India is still expected to achieve 7.4% economic growth in the 2026 fiscal year.
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Despite facing pressure from US tariffs and geopolitical tensions, the Indian government expects economic growth to exceed 7% in this fiscal year, maintaining its status as the fastest-growing major economy in the world.
On January 7, preliminary data released by India’s Ministry of Statistics and Programme Implementation showed that the GDP for the fiscal year ending next March is expected to grow by 7.4%, slightly lower than economists’ median forecast of 7.5%. Final data will be published after the end of the fiscal year. It is worth noting that India is planning to revise its GDP calculation method, possibly in February, which may have a significant impact on growth forecasts.
According to the ministry, at this rate, India’s nominal economic size will reach about 357.14 trillion rupees (4 trillion USD). HDFC Bank economist Sakshi Gupta stated that the data reflects that “despite rising global uncertainties, India’s economy continues to perform well.”
However, some economists are concerned that nominal GDP growth is lower than expected, believing this indicates weak income growth, which could increase pressure on the government to cut spending in order to meet deficit targets. DBS Bank economist Radhika Rao said: “Market focus will be on nominal growth rather than real growth rate. Spending may need to be tightened in fiscal year 2026 to keep within deficit targets.”
US high tariffs impact export sector
India remains one of the few major economies yet to reach a trade agreement with the United States, and this uncertainty puts pressure on its economic outlook. In August last year, US President Trump imposed a 50% tariff on Indian exports, the highest rate in Asia.
According to Xinhua News Agency, on January 4, US President Trump warned that if India did not comply with US requests to limit purchases of Russian oil, the US could further increase tariffs on Indian products. In August 2025, the US government, citing Indian imports of Russian oil, will impose punitive tariffs on Indian goods exported to the US.
Tariffs have severely impacted India’s labor-intensive export sectors, including textiles, gems and jewelry, and leather products. Goldman Sachs estimates that even assuming India and the US reach a trade agreement by March, India’s economic growth will still slow to 6.8% in the next fiscal year.
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