Is India’s Growth More Stable in FY26 and FY27 as China Falters?
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Synopsis
In a landscape of economic uncertainties, India's growth is projected to be notably stable at 6.2% and 6.3% for FY26 and FY27, respectively. This contrasts with China's anticipated decline, highlighting India's potential resilience. Discover how fiscal and monetary policies could further support this growth.
Key Takeaways
- India's projected growth in FY26 is 6.2% and FY27 is 6.3%.
- China's growth revised down to 4% for both fiscal years.
- Stable inflation is anticipated with CPI averaging around 4.2%.
- High-frequency economic indicators suggest a need for policy support.
- Capital expenditure momentum is crucial for sustaining growth.
New Delhi, May 28 (NationPress) India's growth is forecasted to be notably more stable, with predictions of 6.2 percent in FY26 and 6.3 percent in FY27. In contrast, there has been a significant downward adjustment of 0.6 percentage points and 0.5 percentage points for China's growth prospects this fiscal year and the next, now estimated at 4 percent for each year, according to an EY report released on Wednesday.
The report indicates that for China, modest growth is expected in 2027, followed by a decline.
Despite ongoing global uncertainties, India has the potential to achieve a real GDP growth of 6.5 percent in FY26.
The report states, “The trajectory of headline inflation in India is anticipated to remain relatively stable. CPI inflation is expected to be 4.2 percent in 2025 (FY26), 4.1 percent in 2026 (FY27), and 4 percent thereafter, aligning closely with the central bank's target level.”
With CPI inflation projected to stay at or below 4 percent on average in FY26, India could achieve a real GDP growth of 6.5 percent alongside a continued rate reduction cycle and the government's renewed focus on capital expenditure.
The report adds, “Our expectation is that Q1 FY26 inflation may average around 3.4 percent, with full-year inflation ranging between 3.5 percent and 4.0 percent.” This is favorable for sustaining the policy rate reduction cycle in FY26.
High-frequency indicators for April and May 2025 signify the necessity for persistent policy support to uphold growth momentum.
The manufacturing PMI reached a 10-month peak of 58.2 in April 2025, while the services PMI climbed to 58.7, significantly surpassing its long-term average of 54.2. Gross GST collections hit a record Rs 2.37 lakh crore in April 2025, marking the highest monthly collection since GST's implementation.
Growth in gross bank credit remained stable at 12.1 percent in March 2025, close to 12.0 percent in February 2025. Merchandise exports and imports saw growth rise to 9.0 percent and 19.1 percent, respectively, in April 2025, compared to 0.7 percent and 11.4 percent in March 2025, partly driven by base effects.
The EY report emphasizes that India may need to leverage both its monetary and fiscal policy tools to alleviate the negative impacts of domestic challenges and global slowdowns on its GDP growth.
At this point, it's crucial for the government to restore the momentum of capital expenditure growth and maintain the repo rate reduction cycle to ensure that India’s real GDP growth remains above 6.5 percent in FY26.
Point of View
I recognize the importance of India's growth story, particularly in the face of global economic challenges. The projections indicate a robust and resilient economy that could provide stability in uncertain times, emphasizing the need for continued policy support.
NationPress
23/09/2025
Frequently Asked Questions
What is the projected GDP growth for India in FY26?
India's GDP growth is projected to be 6.2% in FY26 according to an EY report.
How does India's growth compare to China's?
China's growth is revised down to 4% for FY26 and FY27, highlighting India's more stable outlook.
What is the expected inflation rate in India for FY26?
The CPI inflation in India is expected to average 4.2% in FY26.
What are the key indicators of India's economic stability?
Key indicators include a stable manufacturing PMI, high GST collections, and consistent bank credit growth.
What measures can India take to ensure sustained growth?
India may need to leverage both fiscal and monetary policies to mitigate potential economic challenges.
