India’s economic trajectory continues to hold promise for FY26, despite a global slowdown in trade, thanks to a significant cushion provided by low international crude oil prices. A senior government official has forecasted that India’s GDP growth could hit at least 6.5 percent in FY26, aligning closely with the Economic Survey’s projection range of 6.3–6.8 percent.

This forecast is built on the assumption that global oil prices will remain below $70 per barrel, a key factor that has historically helped the Indian economy manage its import bills, inflation, and fiscal deficit.

Low Crude Oil Prices Offer Economic Cushion

According to the senior official, “Oil prices have been hovering way below $70 per barrel and are expected to stay there. So we can still expect growth to be around 6.5 percent as outlined in the Economic Survey.”

In the early hours of April 7, Brent crude oil dropped nearly 4% to $63.21 per barrel, while West Texas Intermediate (WTI) slid to $59.79 per barrel, nearing four-year lows. The sharp decline is attributed to fears of weakening global demand, triggered by the escalating trade war between the US and China.

India’s Budget Considered Trade Uncertainties in Advance

Another senior official from the finance ministry highlighted that India’s FY26 Budget already factored in potential trade risks, especially those stemming from US President Donald Trump’s protectionist trade policies.

The government set a nominal GDP growth target of 10.1 percent for FY26, slightly more conservative than the 10.4 percent estimates suggested by economists. “We took into account the uncertainties on the global trade front… we could at most go to 10 percent from 10.1 percent,” the official explained.

This cautious stance suggests that India anticipated external risks and adjusted fiscal expectations accordingly.

Trump’s Tariffs Expected to Impact Indian Exports

President Donald Trump’s announcement of a 26 percent reciprocal tariff on Indian exports has raised concerns among economists about India’s near-term growth trajectory.

Multiple analysts have downgraded their growth projections:

• Barclays cut its FY26 growth estimate to 6.5 percent, warning of a 30-basis point downside risk due to the new tariffs.

• Goldman Sachs is more bearish, reducing its growth forecast to 6.1 percent, citing a larger expected hit to exports.

The reciprocal tariffs are aimed at countering what the US perceives as non-reciprocal trade arrangements. Trump has also hinted at increasing tariffs further if trading partners retaliate or fail to resolve the imbalance.

Economic Survey 2024–25: Growth Forecast and Risks

The Economic Survey 2024–25 paints a cautiously optimistic picture. It predicts India’s GDP to grow between 6.3 and 6.8 percent in FY26, subject to external risks such as global geopolitical tensions, trade wars, and commodity price shocks.

The Survey also reassures that India’s domestic fundamentals remain robust, with several supporting factors:

• Stable private consumption

• Strong external account

• Calibrated fiscal consolidation

These factors are expected to keep the growth momentum intact, even if exports take a temporary hit.

India’s Strength in Domestic Demand and Fiscal Stability

Unlike many developing economies, India benefits from a large domestic consumer base, which cushions the blow from declining exports. According to the Economic Survey, private consumption continues to be a key driver of GDP growth.

Additionally, fiscal prudence and improved tax compliance have enabled the government to maintain a sound fiscal balance, even in the face of external shocks.

Nominal vs Real Growth: What’s the Difference?

While real GDP growth accounts for inflation and shows the actual increase in value produced, nominal GDP growth includes price level changes.

For FY26:

• Nominal growth is projected at 10.1 percent

• Real growth (adjusted for inflation) is expected between 6.3–6.8 percent

This gap highlights the importance of keeping inflation in check and ensuring that growth is not simply driven by rising prices.

Risks from Trade Wars and Currency Volatility

A significant risk to India’s GDP outlook comes from the ongoing trade tensions between the US and its trading partners, including China and India.

Trade wars often result in:

• Decreased export demand

• Supply chain disruptions

• Currency volatility

These risks could amplify external shocks and affect sectors such as IT services, pharmaceuticals, and manufacturing exports, which are crucial to India’s external earnings.

Expert Opinions and Market Sentiment

Economists are split on the likely outcome:

• Some believe that India’s domestic resilience and low oil prices will offset export losses.

• Others argue that India is underestimating the long-term damage of protectionist policies, particularly from the US.

The stock market has also shown mixed reactions, with export-heavy sectors under pressure.

Conclusion: India Eyes Growth Amid Global Storms

India’s GDP outlook for FY26 remains cautiously optimistic, backed by domestic demand, fiscal prudence, and low oil prices. However, external risks such as the US tariff war and weakening global trade continue to loom large.

The government’s preemptive budget planning, reflected in its 10.1 percent nominal growth assumption, provides confidence that India is navigating global uncertainties wisely.

Still, careful policy navigation and sectoral support measures will be key in maintaining momentum and cushioning against potential export headwinds.

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