Page 21 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

5. Indian Economy

Snapshot

India continued to demonstrate strong economic momentum as it entered FY 2026–27, supported by
resilient domestic demand, strengthening investment activity and broad-based expansion across
manufacturing and services. The economy's underlying growth drivers have remained relatively robust
despite a challenging global environment characterized by geopolitical tensions, elevated energy prices
and trade uncertainties.

Economic activity strengthened significantly during FY 2025–26, with real GDP growth estimated at 7.6
per cent, up from 7.1 per cent in the preceding year. The improvement reflected the combined
contribution of consumption, investment and services activity. Private final consumption expenditure
grew strongly, while gross fixed capital formation also gained momentum, supported by sustained public
capital expenditure and improving private investment sentiment. The resilience of domestic demand has
provided an important cushion against weaker global conditions and external trade uncertainties.

The supply side of the economy has also become increasingly broad-based. The secondary sector
expanded strongly, supported by manufacturing and construction, with manufacturing growth benefiting
from the expansion of electronics, automobiles, textiles and pharmaceuticals, alongside rising capacity
utilization and production-linked incentives. Construction activity continued to benefit from government
and private investment in infrastructure, housing and urban development. Services remained the largest
contributor to economic output, with financial, real estate and professional services recording particularly
strong growth, supported by credit expansion, digitalization and continued demand for IT and business
services.

India's growth has increasingly been underpinned by structural factors, including expanding digital
infrastructure, favorable demographics, rising formalization, infrastructure investment and the gradual
deepening of manufacturing capabilities. At the same time, continued improvements in financial-sector
resilience and domestic productive capacity have strengthened the economy's ability to absorb external
shocks. These factors are expected to remain important in sustaining India's growth momentum as the
economy transitions towards a more investment- and productivity-driven growth model.

India GDP position

India is expected to remain among the fastest-growing major economies globally during FY 2026–27,
although growth is projected to moderate from the exceptionally strong pace recorded in FY 2025–26.
The Reserve Bank of India has projected real GDP growth of approximately 6.9 per cent for FY 2026–27,
while international institutions have placed their forecasts within a broadly similar range. The World
Bank projects growth of 6.6 per cent in FY 2026–27, while the OECD projects growth of 6.3 per cent,
reflecting the impact of higher energy prices, weaker external demand and tighter economic conditions.

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