India’s economy is expected to remain on a relatively strong footing over the next two years, even as growth moderates from the high levels seen in 2025, supported primarily by resilient domestic demand, sustained public investment and policy continuity, according to Deloitte’s India Economic Outlook published on January 15.

The report notes that India entered 2025 with solid growth momentum despite an uncertain global backdrop characterised by trade disruptions, geopolitical tensions and uneven recovery among major economies. Strong internal drivers helped offset external pressures, allowing India to maintain one of the fastest growth rates among large economies.

Deloitte estimates that GDP growth in 2025–26 is likely to come in between 7.5% and 7.8%, reflecting robust performance in the first half of the fiscal year. However, growth is projected to slow to a range of 6.6% to 6.9% in 2026–27 as the impact of a higher base, fading cyclical support and continued global uncertainty becomes more visible.

Private consumption remains a key pillar of the growth outlook. Deloitte highlights that household spending has stayed resilient, supported by easing inflationary pressures, targeted tax measures and gradual improvement in rural demand. The report notes that consumption growth has broadened across income groups, although urban demand has remained stronger than rural consumption in recent quarters.

Investment activity has also played an important role in supporting economic expansion. Government-led capital expenditure, particularly on infrastructure such as roads, railways, ports and energy projects, has remained elevated. Deloitte points out that this sustained public investment has helped crowd in private sector investment by improving capacity utilisation and reducing logistical bottlenecks. Gross fixed capital formation has therefore continued to contribute meaningfully to overall growth.

On the policy front, the report observes that macroeconomic management has focused on balancing growth support with stability. Fiscal policy has prioritised capital spending while maintaining a gradual path towards consolidation. At the same time, monetary policy has remained calibrated, aiming to anchor inflation expectations without unduly constraining credit growth. Deloitte suggests that this policy mix has helped preserve macroeconomic stability, which remains critical for sustaining investor confidence.

Inflation dynamics continue to influence the outlook. While headline inflation has eased from earlier peaks, Deloitte cautions that food prices and global commodity trends could still create volatility. The report notes that managing inflation risks will remain a central challenge for policymakers, particularly in the context of weather-related disruptions and global supply-side shocks.

External demand conditions are expected to remain mixed. Deloitte points out that while India’s services exports, particularly in information technology and business services, have shown resilience, merchandise exports continue to face headwinds from weak global demand and trade uncertainties. Slower growth in advanced economies and ongoing geopolitical tensions are likely to weigh on export performance in the near term.

However, the report highlights India’s efforts to diversify trade and investment partnerships as a potential mitigating factor. New trade agreements and closer economic ties with regions such as Southeast Asia, the Middle East and Africa are expected to provide some support to export growth over the medium term. Deloitte also notes that policy initiatives aimed at strengthening domestic manufacturing competitiveness could help India integrate more deeply into global supply chains.

Sectorally, the outlook suggests broad-based contributions to growth. Services are expected to remain the primary driver, supported by domestic demand and exports. Manufacturing activity is likely to benefit from infrastructure investment and policy incentives, although global demand conditions may limit export-oriented manufacturing growth. Agriculture performance will remain dependent on monsoon conditions and structural reforms aimed at improving productivity and supply-chain efficiency.

Deloitte also draws attention to structural factors shaping India’s medium-term prospects. Long-standing challenges such as labour market rigidities, skill mismatches and productivity gaps continue to constrain potential growth. Addressing these issues through reforms in education, skilling, labour participation and regulatory simplification is seen as essential to sustaining higher growth over the long term.

Demographic trends are highlighted as a key structural advantage. India’s large and relatively young workforce provides a significant opportunity, particularly in services, technology and emerging sectors. Deloitte notes that continued investment in human capital, digital infrastructure and innovation will be critical to translating demographic potential into durable economic gains.

The report also flags risks to the outlook. Global geopolitical developments, shifts in trade policy and volatility in capital flows could create near-term pressures. Domestically, uneven income growth and rural demand recovery could pose challenges if not addressed through targeted policy measures. Deloitte suggests that maintaining reform momentum and policy predictability will be important in navigating these risks.

Overall, Deloitte’s assessment suggests that while India’s growth is set to moderate from recent highs, the economy remains well placed relative to peers. Strong domestic demand, sustained public investment and policy continuity are expected to underpin expansion, even as global conditions remain uncertain. The report underscores that continued structural reforms will be key to ensuring that near-term resilience translates into sustainable, long-term growth.