CEA Projects Steady FY26 Growth Amid Global Economic Challenges

By Saurabh Shukla

New Delhi: In a recent presentation on GDP numbers, India’s Chief Economic Advisor (CEA) V Anantha Nageswaran outlined a relatively resilient economic outlook for the country amid signs of global economic slowdown in 2025 and 2026. While international agencies are revising global growth forecasts downward, India's projections have seen only marginal adjustments, reflecting the economy’s strong fundamentals and policy support.

The government continues to maintain its growth estimate for FY26 in the range of 6.3% to 6.8%, backed by steady domestic demand and stable macroeconomic indicators.

According to the CEA's presentation post-GDP numbers, high-frequency indicators for April 2025 show robust industrial production and commercial activity, signalling sustained momentum in the post-pandemic recovery.

Food inflation remains under control, thanks to a strong rabi harvest, higher summer sowing, efficient procurement and favourable monsoon forecasts. Additionally, India’s exports remain buoyant and foreign exchange reserves are strong, offering about 11 months of import cover — a key buffer in an uncertain global environment.

Declining global crude oil prices are expected to reduce India’s import bill, ease fiscal constraints, and relieve pressure on the external sector. However, the CEA cautioned that diverging monetary policy paths across major economies may affect capital flows and financial market dynamics. Despite these external risks, India’s growth outlook for FY26 remains supported by a recovery in rural consumption and steady performance in services exports. Multiple domestic and international agencies project GDP growth in the 6.3% to 6.7% range, reaffirming confidence in the Indian economy’s resilience.

Expert's View

On GDP Data, Chief Economist, Emkay Global Financial Services, Madhavi Arora said that the Q4 growth print partly reflects the back-loaded spending effect of the government, both Centre and States, led more by public capex spending.

"As a whole, the growth has been in line with the government estimates, with capital formation staying broadly steady," Arora said.

According to Arora, FY26 will be impacted by global uncertainties weighing on near-term investment intentions, while easing urban incomes will weigh on private consumption.

"However, a part of this could be countered by continued monetary easing on both policy rates and regulatory frameworks, even as the fiscal policy will have limited growth pushing levers through conventional easing," Arora said.

Chief Economist at Careedge Rajani Sinha, sees India’s GDP growth for the fourth quarter of FY25 came in at 7.4%, significantly exceeding expectations and signalling strong economic momentum.

"This brings full year FY25 growth to 6.5%, which is in line with the second advance estimate of MOSPI. The Q4 GVA growth stood at 6.8%, driven by a significant uptick in sectors such as manufacturing, construction, and financial, real estate, and professional services," Sinha said.

Agricultural growth remained healthy despite moderation. Contrary to expectations, growth in the trade, hotels, transport, communication, and broadcasting services segment slowed, despite large-scale festivities such as the Kumbh Mela, she said.

On the expenditure side, private consumption remained healthy. Rural demand is expected to be supported by favourable agricultural output and easing inflation, while the outlook for urban demand remains mixed. Anecdotal evidence points to subdued wage growth, contributing to muted urban consumption. The recovery in manufacturing and construction was largely in line with expectations, she added.

According to Sinha, it was likely supported by strategic inventory front-loading by firms in anticipation of reciprocal tariff measures and by strong government capital expenditure.

"Although central government capex contracted by 4% during January–February 2025, robust capex spending in Q3 helped sustain construction activity and GFCF in Q4, consistent with the typical lag between capex deployment and its economic impact," Sinha said.

Sinha believes that the strength in rural demand is expected to continue on the back of favourable prospects for monsoon, healthy reservoir levels and upbeat agricultural output.

"However, the softness in urban demand continues to be an area of concern. On a positive note, inflationary pressures have been on a continued downward trajectory, particularly in the food category. Additionally, the consumption scenario is anticipated to gain on account of factors such as lower tax burden and RBI rate cuts. Factoring all of these aspects, we expect GDP growth to be at 6.2% in FY26," she added.