The Organisation for Economic Co-operation and Development (OECD) has become the latest global body to raise its growth forecast for India in the last week, predicting that India’s economy will grow by 7.1% in 2026-27, up from 6.3% forecast in June. It did, however, say that growth in the second half of the year is expected to slow. 

This comes soon after the three most-recognised global ratings agencies — Moody’s, S&P Global, and Fitch Ratings — raised their respective growth outlooks for India over the last week. 

The OECD, in its Economic Outlook Interim Report September 2026 released on Wednesday, said that several countries have been able to mitigate the damage from the West Asia crisis by rapid growth in artificial intelligence-related investment and production in many economies. 

Domestic resilience

For India, however, it said domestic demand and government policy cushioned the impact. 

“This was also the case in China, whilst growth in several other G20 emerging market economies, such as India, Indonesia and Brazil, was underpinned by resilient domestic demand and government policies that cushioned households and firms from the impact of higher energy prices,” the report said.

However, the report also said that growth in the second half of the ongoing financial year 2026-27 was expected to slow. 

“Despite recent strong momentum, reduced purchasing power is also expected to weaken growth in India through the second half of this year, before a gradual recovery takes place in 2027,” the OECD said. 

It estimated that growth is projected to fall from 7.8% in 2025-26 to 7.1% in 2026-27, although this is higher than its June estimate for the year, and 6.5% in 2027-28.

Upgrades by others

S&P Global on Tuesday revised upwards its 2026-27 growth forecast for India to 7% from the previously-reported 6.6%. 

“Several factors drove growth to higher levels than we expected in the June quarter,” S&P Global said in its Economic Outlook for Asia-Pacific. “These include robust industrial activity, healthy consumption, strong goods exports, and accelerating government investment.”

However, it, too, added that it expects “growth to ease” in the second half of the financial year as the tailwinds from Goods and Services Tax rationalisation and income tax cuts diminish. 

“Weather-related risks warrant close monitoring,” S&P added. “Cumulative rains were 15% below normal till September 9, 2026, in the current monsoon season. Agricultural output and food inflation therefore remain key variables to watch.”

Fitch also raised its growth forecast for India in 2026-27 on September 22, to 6.9% from 6.4% predicted earlier. Its assessment was the same as the others, citing the growth upgrade to domestic economic resilience while also predicting a slowdown in the second half of the year.

Last week, Moody’s Ratings said the Indian economy’s “demonstrated resilience to the global shock wrought by the conflict in the Middle East has driven an upward revision” of its growth forecast for 2026-27 to 7% from 6% previously predicted.

The West Asia conflict remains a challenge to the supply chains of oil and other key commodities and is weighing on business confidence, Reserve Bank of India (RBI) officials stated in the August edition of RBI Bulletin which was released on Tuesday (August 25, 2026).

The new U.S. tariffs compounded the uncertainty in international trade, they said in the ‘State of the Economy’ article, adding that despite this, the global economy was expanding, though with inflationary pressures. 

Stating that the Indian economy continued to display strength notwithstanding these headwinds, they said it was on account of the country’s “robust macroeconomic fundamentals” that continued to “provide cushion to the domestic economy.”

They said domestic demand remained buoyant, as reflected by several indicators, including vehicle and tractor sales.

Petroleum product consumption growth returned to positive territory after three straight months of contraction, they pointed out.

Both merchandise exports and imports grew strongly in July 2026, with exports reaching a four-month high (in 2026-27 so far). The merchandise trade deficit widened in July, both sequentially and year on year (YoY), reflecting a widening deficit in electronic goods, they said. 

The pick-up in monsoon activity during July supported kharif sowing, taking it closer to the previous year’s level, they observed,

Stating that headline consumer price index (CPI) inflation increased marginally to 4.45% (YoY) in July 2026 from 4.38% in June, driven by ‘food and beverages’, while core inflation remained unchanged, they said eight out of twelve divisions witnessed a sequential increase in inflation in July.

“While headline CPI inflation edged up above the target, it was primarily on account of supply-side pressures. Stable core inflation reaffirmed the lower pass-through of cost pressures,” they emphasised.

The increase in ‘food and beverages’ inflation remained broad-based, with meat, eggs, and spices registering double-digit inflation. On a month-on-month (MoM) basis, indices for all sub-components of ‘food and beverages’ registered positive momentum in July. Fuel inflation edged up marginally in July, they said. 

As per the article, during August so far (till the 21st), high-frequency data suggest a broad-based sequential increase in food prices. Among cereals, rice and wheat prices continued their upward trajectory, though their pace of MoM increase stabilised.

“Within pulses, prices of all the major constituents inched up over previous month. Edible oil prices registered broad-based increases, led by mustard and palm oil. Pace of increase in prices of key vegetables moderated sequentially, with tomato prices recording a MoM decline,” the officials stated.

The price of the Indian basket crude oil increased to $89.7 per barrel in August (till 20th), higher than the average price recorded in both June and July, they stated.

The inflation edged up marginally both in urban and rural areas in July and most of the States/ UTs recorded inflation in the range of 2–6%, they stated.

As conflicts and geopolitical uncertainties around tariffs cloud domestic growth, a key parliamentary committee has decided to examine the evolving economic condition of the country.

According to a Lok Sabha bulletin, the Standing Committee on Finance has chosen ‘Evolving Economic Conditions in the Country’ as an additional subject for detailed examination during the year 2025-26.

Parliamentary panels select their subjects soon after they are constituted. But they are at liberty to select additional subjects, keeping in mind evolving circumstances.

Indian economy is estimated to have grown at 7.7% in 2025-26 (April-March), with a robust 7.8% growth in the January-March quarter.

India’s GDP had grown at 7.1% in the 2024-25 fiscal year.

However, the RBI estimates GDP growth to slow to 6.6% in the current fiscal year as the ongoing conflict in West Asia pushes up cost of fertiliser and fuel globally. India is a net importer of both crude oil and fertiliser.

The committee is likely to seek input from the finance ministry, the Reserve Bank of India (RBI), economists, and other stakeholders before finalising its report containing its observations and recommendations.

The examination is expected to cover topics, including economic growth, inflation, employment, investment trends, fiscal management, banking sector developments, trade and the impact of global developments on India.

The committee’s study assumes significance at a time when India is navigating challenges arising from geopolitical tensions, supply chain disruptions, trade uncertainties and fluctuations in commodity prices, while seeking to sustain high economic growth.

For the 2026-27 period, the Standing Committee on Finance, chaired by Bhartruhari Mahtani, has chosen subjects spanning across ministries, including Finance, Corporate Affairs, Planning (NITI Aayog), and Statistics.

India’s economic condition is very “strong, capable and healthy” despite the adverse impact of the West Asia conflict and global uncertainties said Reserve Bank of India (RBI) Governor Sanjay Malhotra while answering a question during the post Monetary Policy Cimmittee (MPC) meeting press conference on Friday (June 5, 2026).  

“There is a global shock and, in that, India is not alone. All countries are affected. However, as far as India economic condition is concerned, we are comparatively, as compared to other countries and similar shocks, today better placed. Our economic strength has increased. We are having Gross Domestic Product [GDP] growth of about 6.5% and no major country has this type of growth,” Mr. Malhotra said.

However, he said inflation will increase in line with the rise in fuel prices. “But we expect it will not last long. Our financial strength is robust, our economy is growing, our banks are strong and capable and India’s corporate sector’s balance sheet is very healthy. Our foreign exchange reserves are enough and it can take care of 11 months of imports. Overall, we are in a far better condition,” he emphasised. 

He said the RBI was confident that it would deal with the current situation effectively and in turning this crisis into an opportunity, the country would emerge stronger so that such crisis and shocks would be faced effectively. 

Asked if the situation has changed from last month when Prime Minister Narendra Modi had urged the citizens not to go on foreign travel, postpone buying gold, work from home, and reduce fuel consumption, he said “It is important for all of us to be prudent, to be judicious, not be wasteful. That message I think he gave and it should be taken on that spirit.”

Answering another question on what worries the RBI the most, he said, “Its the duration of the conflict and the time it would take for the restoration of the supply chain. The major risk is what impact it will have on price and for how long.”

Other than this the worries are concerning monsoon and El Nino, he added.

In this year’s inflation forecast, the RBI has assumed the price of crude at $95 per barrel, so the projected inflation is higher.

Earlier in the day, despite all major central banks gearing up to tighten monetary policy, the Monetary Policy Committee (MPC) voted unanimously to hold policy Repo Rate at 5.25% and maintain the neutral stance.

Since the passthrough of higher fuel prices has become visible in overall price rise across sectors, the MPC has reduced growth forecast for FY27 to 6.6% from 6.9% earlier and increased inflation number to 5.1% which is 50 basis point higher than the earlier projection.

India’s services sector growth touched a six-month high of 59.8 in May, boosted by healthy demand conditions, new client wins, and ongoing improvements in new business intakes, a monthly survey said on Wednesday (June 3, 2026).

The seasonally adjusted Hong Kong and Shanghai Banking Corporation (HSBC) India Services Purchasing Managers’ Index (PMI) Business Activity Index rose to 59.8 in May, from 58.8 in April, signalling the strongest rate of expansion since last November. The HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before.

In the PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction. “India’s services PMI signalled an expansion in business activity in May, supported by a continued rise in new business. External demand for India-provided services also grew at a faster pace, rebounding after a sharp decline in April. Input cost inflation eased, which in turn reduced pressure on selling prices,” said Pranjul Bhandari, Chief India Economist at HSBC.

Strengthening demand for services such as freight, digital solutions, e-commerce, entertainment and IT reportedly boosted new business growth during May. As a result, companies lifted activity to a greater extent and continued to add to payroll numbers.

However, growth of external demand remained below the 2025 average, the survey said, adding that the expansion in international orders was nevertheless solid, with firms citing gains from Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE and the U.K.

On the prices front, input prices across the service economy continued to increase at an above-trend pace during May. Survey participants reported having paid more for food, fuel, gas, labour and materials compared to April.

Economic Survey 2025-26: India’s services sector emerged as a stabilising force amidst global uncertainty

In terms of jobs, Indian services companies signalled a further increase in payroll numbers. The overall rate of job creation was solid and the second-fastest in just under a year (behind April), but fewer than 7% of panellists signalled greater hiring, and the vast majority indicated no change in headcounts.

Regarding the 12-month outlook for business activity, services firms expect demand conditions to remain favourable and therefore support output. The overall level of confidence slipped to a three-month low and was below the historical trend. Meanwhile, the HSBC India Composite PMI Output Index continued to recover from March’s slowdown, rising from 58.2 in April to 59.3 in May. Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.

New orders placed with private sector companies rose at the quickest pace in six months, and the aggregate selling prices rose at the weakest rate since January. The HSBC India Services PMI is compiled by Standard & Poor’s (S&P) Global from responses to questionnaires sent to a panel of around 400 service sector companies.

India’s equity markets slipped to seventh place in terms of market capitalisation on Tuesday (June 2, 2026) as heavy ​foreign selling, weak earnings growth and limited exposure to AI-linked stocks allowed ‌South Korea’s chip-heavy market to overtake it.

South Korean stocks have rallied ​this year, driven by AI chipmakers, which have lifted ⁠the combined value of companies listed on the KOSPI, KOSDAQ and KONEX to $5.01 trillion, surpassing the $4.85 trillion value of firms on India’s National Stock Exchange, exchange ‌data showed.

India, once a darling among emerging markets, has now fallen two rungs in a fortnight after slipping behind Taiwan ‌last month.

“About 18 months ago, India’s equity market cap was ‌roughly 3.5 ⁠times South Korea’s and more than twice Taiwan’s. Fast forward ⁠just five months into 2026 and that lead has evaporated,” Bernstein analysts Venugopal Garre and Nikhil Arela said in a note.

India’s Nifty 50 and BSE Sensex have lost 10.1% and ​12.5% each this year, ‌while the IT index – the second-heaviest sector on the benchmarks – has tumbled 19%, pressured by a subdued earnings outlook and persistent foreign selling.

Foreign investors have pulled out $26.4 billion from Indian stocks so far in 2026, ‌surpassing $18.91 billion in 2025 – the previous annual record.

Additionally, India’s share in ​the MSCI Global Standard index has shrunk to 12.3% from a peak of 21% in September 2024.

“It’s really ⁠a remarkable decline and a restructure of the whole investment environment for us because of, obviously, the rise of South Korea and Taiwan as ‌well,” said Naomi Waistell, a fund manager in the emerging equities team at French firm Carmignac, which manages 41 billion euros ($47.76 billion) in assets.

The contrast is particularly stark in technology-heavy markets. South Korean chipmakers Samsung Electronics and SK Hynix have surged this year, lifting the KOSPI 107% higher while Taiwan SE Weighted index has advanced 59%, boosted by demand for AI-linked ‌stocks.

India, by comparison, has struggled to benefit from the AI-driven investment boom.

Market returns ​indicate that the narrative is that “AI is the defining theme and semiconductors are at its centre and within emerging markets, that ⁠story belongs to Taiwan and Korea, not India,” said Abhay Laijawala, managing ⁠director and India chief investment officer at Lighthouse Canton.

However, that view may be overstated as India offers a “picks-and-shovels” opportunity in ‌the AI era through investments tied to electricity, cooling systems, physical infrastructure and data centres that underpin the broader AI ecosystem, Laijawala added. 

The International Monetary Fund has revised upwards its estimate of India’s GDP growth in the current financial year 2025-26 to 7.3% from its earlier prediction of 6.6%.

This upward revision, the IMF said in its January 2026 World Economic Outlook update released on Monday (January 19, 2026), was primarily a reflection of stronger-than-expected growth in the third quarter, and “strong momentum” in the fourth quarter.

“In India, growth is revised upward by 0.7 percentage point to 7.3% for 2025 [FY 2025-26], reflecting the better-than-expected outturn in the third quarter of the year and strong momentum in the fourth quarter,” the report said. “Growth is projected to moderate to 6.4 percent in 2026 and 2027 as cyclical and temporary factors wane.”

The IMF’s prediction of 7.3% growth for 2025-26 is just marginally slower than the 7.4% the government of India itself predicted for the year.

For the global economy, the report projects growth to remain “resilient” at 3.3% in calendar year 2026 and at 3.2% in 2027, largely the same as the 3.3% estimated for 2025.

These forecasts entail a small upward revision for 2026 and no change for 2027 as compared with the predictions made in the October 2025 World Economic Outlook (WEO).

“This steady performance on the surface results from the balancing of divergent forces,” the report said. “Headwinds from shifting trade policies are offset by tailwinds from surging investment related to technology, including artificial intelligence (AI), more so in North America and Asia than in other regions, as well as fiscal and monetary support, broadly accommodative financial conditions, and adaptability of the private sector.”

On the inflation front, the report predicted that inflation in India is expected to go back to near-target levels after a decline in 2025 driven by subdued food prices. The Reserve Bank of India’s target for inflation is 4%.

India is expected to grow by 7.2% in the financial year 2025-26, with consumption and public investment expected to “largely offset” the impact of the tariffs by the United States, the United Nations Department of Economic and Social Affairs (UNDESA) said in a report. 

This 7.2% estimate, presented in the UNDESA’s World Economic Situation and Prospects 2026 report, is slightly slower than the 7.4% growth predicted by the Indian government on Wednesday (January 7, 2026) in its First Advance Estimates of GDP for 2025-26.

The report had predicted India’s growth to be 7.4% in calendar year 2025. On a fiscal year basis, the report predicts that India will grow at 6.6% and 6.8% in 2026-27 and 2027-28, respectively.

“In India, growth is estimated at 7.4% for 2025 and forecast at 6.6% for 2026 and 6.7% for 2027, supported by resilient consumption and strong public investment, which should largely offset the adverse impact of higher United States tariffs,” the report said. “Recent tax reforms and monetary easing should provide additional near-term support.”

However, the report did note that, going ahead, the U.S. tariffs could begin to weigh on the economy if they persist.

“However, higher United States tariffs could weigh on export performance in 2026 if current rates persist, as the United States market accounts for about 18% of total exports from India,” it said. 

On the other hand, the report added that, while the tariffs may adversely affect some product categories, key exports such as electronics and smartphones are expected to remain exempt. In addition, it said strong demand from other major markets, including Europe and the Middle East, is projected to partially offset the impact of the tariffs. 

“On the supply side, continued expansion in manufacturing and services sectors will remain a key driver of growth throughout the forecast period,” the report said.

It noted that investment trends among developing economies diverged in 2025. 

“India recorded strong growth in gross fixed capital formation, led by higher public spending on physical and digital infrastructure, defence, and renewable energy,” the report said. “The Cooperation Council for the Arab States of the Gulf (GCC) countries continued to undertake large-scale capital investments aligned with long-term economic diversification strategies.” 

However, in contrast, the report noted that China saw a contraction in its fixed asset investment through the first three quarters of 2025, due to the ongoing weakness in the property sector in that country.

“The Indian rupee stabilised against the United States dollar in the first half of the year, supported by broad dollar weakness,” the report said. “However, in the second half, the Indian rupee edged lower following stronger-than-expected growth in the United States and ongoing trade negotiations.” 

It added that portfolio outflows and higher U.S. tariffs added to depreciation pressures on the Indian rupee. 

“Nonetheless, robust economic performance in India is expected to provide support for the country’s currency in the near term,” the report noted.

The data in the report showed that India’s real effective exchange rate —  which assesses the effect of currency changes and inflation differentials on the international competitiveness of the rupee — improved to 100.9 in 2025 as compared to 104.7 in 2024.

A rise in the index denotes a fall in competitiveness and vice versa.