CHENNAI: While OECD has projected global growth slowing in both 2025 and 2026 due to the global uncertainties, India’s GDP may grow 6.3 per cent in FY26 and 6.4 per cent next fiscal. UBS has raised the forecast of India’s FY26 real GDP growth to 6.4 per cent from 6 per cent predicted earlier. Global economic growth is projected to slow from 3.3 per cent in 2024 to 2.9 per cent in 2025 and 2026 due to substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertainty. GDP growth in the United States is projected to decline from 2.8 per cent in 2024 to 1.6 per cent in 2025 and 1.5 per cent in 2026, finds OECD. However, India may continue to experience strong and broadly stable economic growth. According to OECD, India’s economic growth is projected to be 6.3 per cent in FY 2025-26 and 6.4 per cent in FY 2026-27, supported by robust domestic demand and strong investment. High-frequency indicators suggest that economic activity remained solid in the fourth quarter. Industrial production rose by 3.7 per cent in the first four months of 2025, with the manufacturing sector regaining strength. Private consumption will gradually strengthen, driven by rising real incomes that are helped by moderate inflation, recent tax cuts and a strengthening of the labour market. Investment will be supported by declining interest rates and substantial public capital spending, but higher US tariffs will weigh on exports. Inflation will remain contained at around 4 per cent as economic activity grows around trend. A less benign monsoon season or higher global commodity prices could drive up food prices and inflation. Meanwhile, UBS has raised India’s growth forecast in FY26 to 6.4 per cent from 6 per cent predicted earlier on better-than-expected domestic demand momentum, building in a climb-down of tariffs on Chinese imports, hopes of a likely US-India trade deal and the tailwind of sustained lower global crude oil prices. UBS’ higher GDP forecast assumes no significant increase in the effective tariff rate against India. It expects household consumption growth to pick-up and becomes broad based as rural consumption gathers pace on hopes of a favourable monsoon and lower food prices and urban demand improves on income tax relief, softening inflation and rate cuts.
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