The year 2025 saw the first official indications of a slowdown in India’s rapid economic expansion, with initial projections estimating a growth rate of 6.4%, the slowest pace since the pandemic era. However, this figure was later adjusted to 6.5% in May.

Private consumption is forecasted to rise by 7%, a slight dip from the previous year’s 7.2% growth. In contrast, government expenditure is expected to see a more robust increase of 5.2%, compared to a modest 2.3% rise the year before.

India’s trade dynamics have been impacted by a 50% tariff on exports to the United States, its largest trading partner, since August last year. Although trade negotiations are in progress, these enduring tariffs are likely to exert pressure on India’s economic momentum.

Indian exports to the U.S., its biggest trading partner, have been subject to 50% tariffs since August last year. While negotiations toward a trade agreement are ongoing, the prolonged tariffs are expected to weigh on economic momentum.

Last month, the International Monetary Fund said India’s real GDP is projected to grow 6.6% in fiscal 2026 before moderating to 6.2% in fiscal 2027, assuming a prolonged delay in a U.S.-India trade deal.

Despite these risks, the Indian economy has been surprisingly resilient in the first half of fiscal 2026, growing faster than expected at 7.8% in the June quarter and 8.2% in the three months ending September.

India’s central bank last month revised the real GDP growth for fiscal 2026 to 7.3% from the earlier estimate of 6.8%, citing easing price pressures.

The Reserve Bank of India has lowered its consumer price inflation forecast to 2.0%, from 2.6% for this fiscal year. That gave the central bank room to cut its policy rate by 25 basis points to 5.25%, even as it flagged weakness in some key economic indicators.