Finance Ministry projects robust growth in FY26, cites GST cuts and festive demand as key drivers
India continues to gain momentum despite the uncertain global outlook, IT said. But he warned that the stable global economic activity in recent months was due to temporary factors.
Greater Durability
These include a lower effective tariff rate in the US and trade frontloading that masks underlying structural weaknesses. Stating that these factors also pose downside risks to India’s growth, the report advised against lowering one’s guard. India’s strong growth outlook for FY26 is “supported by domestic demand, favorable monsoon conditions, low inflation, quantitative easing and positive impacts of GST reforms,” the ministry said.
The government focused on making the economy “resilient to external vulnerabilities through structural reforms.” he added. These include initiatives to promote research and innovation such as GST 2.0, greater emphasis on skill development and Promotion of Research and Innovation in the ‘11,000-crore Pharma-MedTech sector scheme. “These initiatives and the government’s ongoing efforts towards deregulation are expected to create a positive multiplier effect on economic activity, supporting domestic demand and sustaining growth momentum,” the ministry said in the review.
The Confederation of All India Traders reported record festival sales of Rs 6.05 lakh crore this year, aided by the GST airlift. This month, the IMF raised its 2025 global growth forecast to 3.2%, compared to the 3% announced in July. The multilateral body also raised India’s growth forecast for 2025-26 to 6.6% from 6.4%. Price stability is expected to continue unless there are “shocks resulting from adverse weather events and supply chain disruptions”, the ministry said. GST cuts, among other steps, are expected to moderate inflation while supporting consumption demand. “Overall, prices are likely to remain soft in FY26,” the report said. Supported by deflation in food categories, inflation fell to an eight-year low of 1.54% in September. Underlining trade flexibility in times of tariff uncertainties, the ministry pointed out that the country’s total exports of goods and services increased by 4.4% to $413.3 billion in the first half of this fiscal year. While goods exports increased by 3%, service exports increased by 6.1%. Encouragingly, core goods exports (excluding oil and bullion) increased by 7.5%, it said.Money Support
The ministry acknowledged that the RBI’s latest regulatory and development policy “reflects a calibrated response to evolving macroeconomic conditions by combining prudence with comprehensive structural reforms.” “These measures are aimed at strengthening the banking sector, improving credit flow, promoting ease of doing business, simplifying foreign exchange management and internationalizing the Indian rupee,” the statement said.
The ministry said the central bank’s efforts to maintain adequate liquidity within the banking system play an important role in providing resources that will accelerate economic activities. It was stated that despite the slowdown in bank loan growth, the general flow of financial resources to the commercial sector continued to increase, thanks to the coming to the fore of non-bank financing sources.
