Can India growth story continue despite geo political disruptions

India can and is expected to continue to grow despite ongoing geopolitical crises, though with some vulnerabilities. India's long-term economic prospects remain robust due to strong domestic demand, continuous infrastructure development, and structural reforms. Recent reports from S&P Global and Deloitte forecast a 6.5% GDP growth for the fiscal year 2025-26, positioning India as the world's fastest-growing major economy. However, India remains vulnerable to external factors like oil price shocks, global financial market volatility, and protectionist trade policies, which could impact certain sectors of the economy.

Forecasts from institutions like the IMF and Morgan Stanley are projecting strong growth, driven by robust domestic demand, government investment in infrastructure, supportive macroeconomic conditions, and ongoing policy reforms. While global headwinds from geopolitical tensions and trade uncertainties exist, India's economic resilience, low inflation, and healthy foreign exchange reserves provide a stable foundation for growth, positioning it as the world's fastest-growing major economy.

Crisil said India’s real gross domestic product (GDP) growth would be steady at 6.5% in fiscal 2026 despite uncertainties stemming from geopolitical turns and trade-related issues led by US tariff actions.

Manufacturing growth is expected to average 9.0% per year over fiscals 2025-2031, up from 6% on average in the pre pandemic decade. The services sector is expected to grow slower, though it will remain the primary growth driver.

Inflation softened in fiscal 2025, led by lower non-food inflation, while food inflation rose. In fiscal 2026, we expect the recent softening in food inflation to continue and pull down the headline further.

Corporate India’s revenue growth is expected to improve to 7-8% on-year in fiscal 2026 vs ~6% in fiscal 2025, closing in on the decadal average of ~8% growth logged over fiscals 2016-2025. This will be led by healthy growth in consumption sectors and will be largely volume-led.

The leg-up to private consumption — accounts for more than 55% of the country’s GDP — from a reduction in taxes, as announced in the budget, can offer some support to capex by improving domestic demand and creating conditions for fresh investments.

For one, urban demand is expected to look up, especially in categories related to middle-income households. For instance, in automobiles, the expected volume growth for two-wheelers is much higher compared with passenger cars, where the target buyers are largely from the high-income category.

Another factor that determines the growth delta on account of tax cuts is the existing penetration levels of the product. In consumer durables, air conditioners will grow much faster than refrigerators and washing machines. Domestic penetration of ACs is significantly low at ~10% as against ~90% in developed economies such as the US. In contrast, refrigerators have a higher existing penetration level of 42% and threshold income levels observed for refrigerator purchase are much lower compared with ACs.

India to grow at 6.1%, China at 3.5% in 2026 amid Trump tariffs, says Goldman Sachs.

Currently the world’s fourth-largest economy, India is on track to become the third-largest by 2030 with a projected $7.3 trillion GDP. This momentum is powered by decisive governance, visionary reforms, and active global engagement. Notably, growth is accelerating, with real GDP expected to rise by 7.8% in Q1 FY 2025-26, up from 6.5% a year earlier.

The ascent is powered by strong domestic demand and transformative policy reforms, making India a prime destination for global capital. With easing inflation, higher employment, and buoyant consumer sentiment, private consumption is expected to further drive GDP growth in the coming months.

India’s job market has undergone a profound transformation, mirroring the country’s economic evolution from a largely agrarian economy in the pre-independence era to a globally integrated, technology-driven one today. Over the decades, employment patterns have shifted in tandem with structural changes in the economy, with the workforce gradually moving from agriculture to industry and, more recently, to services and knowledge-based sectors.

India has rapidly emerged as a top global destination for Foreign Direct Investment (FDI), powered by a decade of structural reforms, investor-friendly policies, and rising competitiveness. Backed by improvements in global rankings and strategic initiatives, investor confidence has strengthened. India witnessed a historic $81 billion worth of foreign investments in FY24-25 alone.

The Government now targets annual FDI inflows of US$ 100 billion, up from the five-year average of over US$ 70 billion, as India positions itself as a global investment hub amid shifting supply chains.

India’s steady growth momentum is powered by resilient domestic demand. Rural consumption is strengthening, urban spending is rising, and private investment is gaining pace. Many businesses are operating close to full capacity and expanding further. Meanwhile, public investment-particularly in infrastructure- remains elevated, and stable borrowing conditions are supporting both firms and households in making future-oriented decisions.