Synopsis
The Indian economy is projected to grow by 6.5% in FY26, driven by government spending on infrastructure and a rise in private investments, according to the EY Economy Watch report.Key Takeaways
- India's GDP is expected to grow by 6.5% in FY26.
- Government infrastructure spending plays a critical role.
- Private investments are anticipated to rise.
- Global energy prices are likely to decrease.
- RBI may lower interest rates by 50-75 basis points.
New Delhi, March 30 (NationPress) The Indian economy is projected to achieve a remarkable 6.5 percent growth in the fiscal year 2025-26, primarily fueled by government investments in substantial infrastructure initiatives and a notable rise in private investments throughout the year, as indicated by the latest EY Economy Watch report.
This report emphasizes the significance of government spending on infrastructure development, which typically yields a higher economic multiplier. Additionally, it notes that India stands to gain from anticipated declines in global energy prices.
Furthermore, it is anticipated that the RBI may reduce its policy interest rate by an additional 50-75 basis points during FY26, a move that could be supported by a downward trend in CPI inflation, which dipped below 4 percent in February 2025—marking the first occurrence since August 2024. Consequently, this scenario may encourage a resurgence in private investment, as highlighted by the report.
On the international stage, the report notes that the OECD has forecasted a slowdown in global growth to 3.1 percent in 2025, down from 3.2 percent in 2024. Growth in the US economy is expected to moderate to 2.2 percent from 2.8 percent. There is a substantial likelihood that the US could face a brief economic downturn, if not a full-blown recession, primarily due to anticipated declines in aggregate demand stemming from recent government spending cuts and employee salary reductions. As cost-containment measures come into play, especially with the expected drop in energy prices, both within the US and globally, a gradual improvement in the US economy is anticipated.
The Indian economy is already grappling with considerable uncertainties stemming from the global slowdown and supply chain disruptions. The effects on India’s export potential may remain erratic until tariff levels among countries stabilize. The EY report suggests that a prudent strategy for the Indian economy would be to maintain its focus on infrastructure expansion.
D.K. Srivastava, Chief Policy Advisor at EY India, stated that India’s evolving demographic landscape, characterized by a growing working-age population, has the potential to create a positive cycle of growth, employment, savings, and investment.
To leverage this opportunity, it is essential for India to progressively enhance its expenditures on health, education, and infrastructure, ensuring that low-income states receive adequate funding through equalisation transfers.
