India's Economy Maintains Robust Growth Amid Global Uncertainties
Despite facing US tariffs and various geopolitical risks, the Indian economy continues to demonstrate remarkable strength. This resilience stems primarily from vigorous domestic demand, growth-oriented government policies, substantial public capital expenditure, and an expanding consumer base. The economy's solid performance highlights its ability to withstand external pressures while maintaining forward momentum.
Impressive Growth Figures and Future Projections
The United Nations' Department of Economic and Social Affairs recently released its World Economic Situation and Prospects 2026 report. According to this comprehensive analysis, India's economy achieved an estimated growth rate of 7.4% during calendar year 2025. Looking ahead, the report projects a growth rate of 6.6% for 2026, indicating sustained economic expansion.
Consultancy firm Grant Thornton Bharat offers additional perspective through news agency PTI. Their analysis suggests the Indian economy will grow between 7.3% and 7.5% during FY26. For FY27, they forecast a growth rate of 7%. These projections reinforce the positive outlook for India's economic trajectory.
The Critical Need for Private Sector Investment
While most domestic macroeconomic factors continue to support healthy economic growth, global uncertainties present significant variables that require careful consideration. Against this backdrop, economic experts consistently identify private sector capital expenditure as a crucial element for maintaining India's high growth trajectory.
Reviving private-sector capital expenditure represents an essential prerequisite for the economy to operate at full capacity. Achieving this revival demands comprehensive, multi-pronged action from the government. With Budget 2026 approaching, financial experts have shared valuable insights regarding measures the government should implement to stimulate private sector investment.
Expert Recommendations for Budget 2026
Manoranjan Sharma, Chief Economist at Infomerics Ratings, advocates for a decisive shift in economic strategy. He believes Budget 2026 should transition from a public capital expenditure-led approach to a growth model firmly anchored in private investment. Sharma recommends a calibrated mix of fiscal incentives, improved financial access, regulatory clarity, and sector-specific policy support to unlock substantial private capital expenditure.
Specifically, he suggests investment tax credits, full expensing of capital outlays, and lower effective tax rates for high-capex projects to enhance investment viability. Financing support through low-cost credit windows, interest subvention, and deeper corporate bond markets could further ease funding constraints. Regulatory reforms including a digital single-window clearance system and faster approvals would significantly reduce execution delays.
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, notes that government tax cuts announced in 2025 have helped stabilize consumer demand outlook, which serves as a key driver for private capex revival. Monetary easing has also created a conducive environment. However, she highlights that global demand and export outlook remain clouded with uncertainty, with elevated tariffs creating additional hurdles.
Bhardwaj expects the government to prepare a comprehensive subsidized package ensuring adequate financing and smoothing the credit cycle for the export sector to adjust to disruptions. She emphasizes continuing focus on infrastructure to maintain investment momentum.
Radhika Rao, Senior Economist and Executive Director at DBS Bank, anticipates the Budget will remain committed to further supply-side measures to attract private sector investments as a key offset to global uncertainties. She projects higher capital expenditure outlays for infrastructure including railways, roads, highways, defence, and transfers to states.
Strategic sectors likely to receive prioritization include defence, semiconductors, electronics, renewable energy, and artificial intelligence/robotics. Budget allocations toward the defence sector have targeted modernization and expansion of indigenous manufacturing capacity, with indications of double-digit increases in the FY27 Budget. Rao also mentions potential reintroduction of concessionary corporate tax rates for new manufacturing companies.
G Chokkalingam, Founder and Head of Research at Equinomics Research Private Limited, observes that India's economic growth now relies largely on domestic capital. Foreign direct investment is not growing adequately to stimulate economic growth, while foreign portfolio investors have shown substantial outflows recently. These trends, combined with US tariffs, may weaken the rupee further and moderate economic growth.
Chokkalingam recommends the Budget focus on strategies addressing both growth and rupee stability. He emphasizes accelerating private capex, especially for import substitutes, which would boost domestic manufacturing GDP and improve rupee exchange rates. He suggests aggressive extension of PLI schemes to numerous import substitutes and appropriate tax structures to encourage private capex in this area.
Sustaining Momentum Through Strategic Investment
India's economic resilience demonstrates the effectiveness of current policies and the strength of domestic fundamentals. However, sustaining this momentum requires strategic focus on reviving private sector investment. The upcoming Budget presents a crucial opportunity to implement measures that will encourage private capital expenditure, address global uncertainties, and reinforce India's position as a rapidly growing economy.
Experts agree that a combination of fiscal incentives, regulatory reforms, sector-specific support, and infrastructure development will create an environment conducive to private investment. As India navigates complex global economic landscapes, these measures will prove essential for maintaining robust growth and achieving long-term economic objectives.
