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BUSINESS & TRADE JANUARY 16, 2026 | The Indian Eye 30

India Set to Outperform Global Economy in

2026 as Domestic Engines Drive Growth

Despite a slowing global economy and rising trade uncertainties, India enters 2026 with resilient

demand, policy support and structural momentum that point to a positive growth outlook.

OUR BUREAU Sectorally, services remain the
key engine of growth. Services output
New Delhi
is projected to grow by over 9 per cent
s the global economy grapples in FY26, with broad-based momen-
with slower growth, geopoliti- tum across trade, transport, finance
Acal tensions and shifting trade and public services. Manufacturing is
patterns, India stands out as a rare also expected to post healthy growth
bright spot heading into 2026. Mul- of around 7 per cent, aided by gov-
tiple assessments—from the United ernment incentives, infrastructure
Nations to leading domestic finan- spending and improving capacity util-
cial institutions—suggest that while isation. While agriculture growth may
challenges remain, the underlying moderate after a strong previous year,
strength of the Indian economy, driv- above-normal monsoons provide a
en by domestic demand, public invest- cushion to rural incomes and con-
ment and supportive monetary policy, sumption.
positions it well for another year of External conditions, though chal-
solid growth. lenging, are not entirely unfavour-
According to the United Nations’ able. Higher US tariffs may affect
World Economic Situation and Pros- select product categories, but India’s
pects (WESP) 2026, global output is diversified export basket and strong
expected to grow by 2.7 per cent in demand from non-US markets are
2026, below the pre-pandemic av- expected to partially offset these pres-
erage of 3.2 per cent. Trade barriers, sures. In fact, early signs of export re-
policy uncertainty and constrained fis- silience are already visible. Merchan-
cal space are weighing on many econ- dise exports to the US rose sharply in
omies, raising fears of a prolonged the first months of FY26 as exporters
period of slower global expansion. front-loaded shipments ahead of tar-
Yet, even in this difficult environment, iff hikes. Ongoing negotiations for a
South Asia is projected to outper- potential India–US trade deal could
form most regions, with GDP growth further improve market access and re-
expected at 5.6 per cent in 2026 and duce tariff burdens, offering an upside
accelerating further to 5.9 per cent in Union Finance Minister Nirmala Sitharaman delivers the inaugural address at the 12th SBI to exports in 2026 and beyond.
2027. Banking and Economics Conclave on the theme ‘Realising the vision of Atmanirbhar Bharat’, in That said, risks remain clear-
India remains the anchor of this ly tilted to the downside. A sharp-
regional resilience. While the UN Mumbai (@nsitharamanoffcX/ANI Photo) er-than-expected slowdown in major
projects India’s growth to moderate economies such as the US, China or
from an estimated 7.4 per cent in ture, has remained robust, crowding There is also growing optimism the European Union could dampen
2025 to 6.6 per cent in 2026, this still in private investment and improving that official growth numbers may trade, investment flows and tourism.
places the country among the fast- long-term productive capacity. Lower eventually be revised upward. A re- Fragile fiscal positions and high pub-
est-growing major economies in the interest rates, following a cumulative port by the State Bank of India (SBI) lic debt in parts of South Asia limit
world. More importantly, the drivers 125-basis-point policy rate cut in 2025, notes that GDP growth for FY26, the scope for countercyclical support
of this growth—resilient household are expected to transmit more fully currently pegged at 7.4 per cent by the in the event of external shocks. The
consumption, strong public capital ex- in 2026, reducing borrowing costs for National Statistical Office’s first ad- UN has also cautioned that rising geo-
penditure and easing financial condi- businesses and households alike. vance estimates, could rise to around political tensions, inward-looking pol-
tions—suggest durability rather than India’s inflation trajectory has 7.5 per cent once the base year is re- icies and weakening multilateralism
a fleeting rebound. also turned favourable. After a vised to 2022–23. Historically, such add to global uncertainty.
Domestic demand continues to marked decline in 2025, inflation is revisions have often lifted growth esti- In a world settling into slower
be India’s biggest strength. Private largely within comfort zones, creating mates, reflecting better data coverage growth, India’s relative strength is its
consumption has held up well, sup- room for continued monetary easing. and structural changes in the econo- scale, its domestic market and its pol-
ported by steady labour markets, This benign inflation environment my. The SBI report also highlights icy capacity. While 2026 may not be
easing inflation and direct benefit contrasts with many advanced and that per capita national income is without headwinds, the balance of ev-
transfers that disproportionately ben- emerging economies still grappling expected to rise by over Rs 16,000 an- idence suggests it could still be a good
efit lower-income households with with price pressures, giving India nually to nearly Rs 2.5 lakh in FY26, year for the Indian economy—one de-
a higher propensity to spend. Public greater policy flexibility to support reinforcing the narrative of improving fined less by exuberance and more by
investment, particularly in infrastruc- growth. living standards. steady, confidence-building progress.

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