BENGALURU, June 27 (Reuters) – The Indian economy is expected to grow at a mostly steady pace this fiscal year and next after reaching a four-year low in 2024-25, according to a Reuters poll of economists. Most forecasts have either remained unchanged or seen minor upward adjustments.
This stable outlook comes despite the Reserve Bank of India cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, aimed at boosting growth amid rising global uncertainties.
The world’s fastest-growing major economy maintains its position largely due to strong government capital expenditure.
Gross domestic product was forecast to expand 6.4% in the current fiscal year ending March 2026, according to the June 17-26 Reuters poll of 51 economists.
This is slightly lower than the 6.5% reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth is projected to increase modestly to 6.7% in FY 2026-27.
This represents a slight improvement from last month’s poll, which had medians of 6.3% and 6.5%, respectively.
“Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out,” said Indranil Pan, chief economist at Yes Bank.
Private sector spending continues to lag significantly, and analysts generally agree that the economy is still not creating enough quality jobs for its large young population.
“One of the biggest challenges for India at the current juncture … is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth,” Pan added.
Some economists noted that there may be downward revisions to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day tariff pause expires on July 9.
Trade negotiations between the two countries have stalled over issues related to auto parts, steel, and farm goods, according to Indian officials with direct knowledge, reducing hopes for a deal before U.S. President Donald Trump’s deadline for reciprocal tariffs.
However, ANZ economist Dhiraj Nim stated they have upgraded their FY 2026 growth forecast based on hopes that the two countries will reach a trade agreement.
“Even so, growth will remain below potential in a challenging global environment, necessitating policy support,” he added.
On June 6, the RBI shifted its policy stance to “neutral” from “accommodative,” signaling a likely end to its shallowest rate-cutting cycle in over a decade.
Economists are divided on whether there will be an extended pause or another 25-basis-point cut in the final three months of the year.
Just over half of respondents – 28 of 53 – expect the repo rate to remain at 5.50% in the fourth quarter, while the rest predict it will be at 5.25% or lower.
Consumer inflation is projected to average 3.6% this fiscal year before increasing to 4.3% next year, according to the poll.
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India’s economy to hold top spot for growth, but underlying weaknesses remain: Reuters poll
BENGALURU, June 27 (Reuters) – The Indian economy will grow at a mostly steady pace this fiscal year and next after marking a four-year low in 2024-25, according to economists polled by Reuters, who have mostly either kept their forecasts unchanged or made marginal upgrades. n nThat stable outlook comes despite the Reserve Bank of India cutting interest rates by a full percentage point since early this year, including an unexpected 50 basis point reduction on June 6, to boost growth in the face of rising global uncertainties. n nSign up here. n nBut the world ‘s fastest-growing major economy still earns that title mostly because government capital expenditure remains strong. n nGross domestic product was forecast to expand 6.4% in the current fiscal year ending March 2026, the June 17-26 Reuters poll of 51 economists found. n nThat is weaker than 6.5% reported for fiscal year 2024-25, which was the slowest since 2020-21. Growth was forecast to pick up modestly to 6.7% in FY 2026-27. n nThat marks a slight upgrade from last month ‘s poll, which had medians of 6.3% and 6.5%, respectively. n n”Most of the growth that was happening was mainly because of the capital expenditures of the government, which will flatten out,” said Indranil Pan, chief economist at Yes Bank. n nPrivate sector spending is still trailing far behind, and analysts generally agree the economy is still failing to create enough quality jobs for its large young population. n n”One of the biggest challenges for India at the current juncture … is per capita income. Job creation has not been strong enough to generate the income needed to support sustainable economic growth,” Pan added. n nSome economists said there may be downgrades to the GDP outlook in the coming months if New Delhi fails to secure a trade agreement with Washington before the 90-day pause on tariffs comes to an end on July 9. n nTrade talks between the two sides have stalled over auto parts, steel and farm goods, Indian officials with direct knowledge told Reuters on Thursday, dashing hopes of a deal ahead of U.S. President Donald Trump ‘s deadline to impose reciprocal tariffs. n nBut ANZ economist Dhiraj Nim wrote they have upgraded their FY 2026 growth forecast on hopes that the two countries would reach a trade deal. n n”Even so, growth will remain below potential in a challenging global environment, warranting policy support,” he added. n nThe RBI shifted its policy stance to “neutral” from “accommodative” on June 6, signalling a likely end to its shallowest rate-cutting cycle in over a decade. n nBut economists are divided on whether there would be a long pause or another 25-basis-point cut in the final three months of the year. n nJust over half of respondents – 28 of 53 – expected the repo rate to stay at 5.50% in the fourth quarter, while the rest forecast it at 5.25% or lower. n nConsumer inflation was expected to average 3.6% this fiscal year before rising to 4.3% next year, the poll showed. n n(Other stories from the June Reuters global economic poll) n nReporting by Pranoy Krishna and Vivek Mishra; Polling by Devayani Sathyan and Veronica Khongwir; Editing by Hari Kishan, Ross Finley and Joe Bavier