India’s GDP to grow 6.5-6.7% in FY’26: Deloitte

Deloitte has forecasted India’s GDP growth at 6.5-6.7% for the current fiscal year, driven by tax incentives in the 2025 Union Budget, which are expected to boost domestic demand despite an unpredictable global trade environment.

The firm also projected India’s GDP growth for FY25 to be between 6.3% and 6.5%. Deloitte emphasized that the economic outlook for FY26 will hinge on India’s ability to navigate the evolving global trade environment while effectively driving domestic consumption through government initiatives.

In its India Economy Outlook, Deloitte highlighted two key factors shaping the country’s economic growth:

1. Positive Impact of Tax Incentives: The Union Budget 2025 includes tax incentives aimed at increasing consumer spending, particularly benefiting the middle class. These measures are expected to raise disposable income, especially among the younger, higher-income population, contributing to domestic demand.

2. Challenges from Global Trade Uncertainty: The second challenge stems from global trade uncertainties, which could dampen economic performance. Deloitte warned that trade-related risks, including fluctuating tariffs, could affect India’s growth prospects.

“The interaction between tax stimulus and global trade uncertainties is expected to keep India’s growth between 6.5% and 6.7% for FY’26,” the report stated.

The government’s FY26 Budget includes a tax incentive of ₹1 lakh crore, aimed at boosting the purchasing power of India’s middle class. Deloitte noted that although this incentive could lead to a decline in revenues, the increased economic activity is expected to help the government stay on track with its fiscal deficit target.

Deloitte India Economist Rumki Majumdar said, “The tax exemptions will increase disposable income for a young, dynamic population with high income elasticity.”

Regarding trade, Deloitte emphasized the significance of India’s upcoming bilateral agreements. It noted that effective negotiations could lead to reciprocal tariffs ranging from 10% to 26%, which could potentially reduce India’s GDP growth by 0.1-0.3%, depending on the terms.

“A successful trade agreement with the US by the fall would present new opportunities for India, especially in tapping into the US market amid ongoing global trade challenges,” Majumdar added.