India's GDP Soars Despite Global Tariff Storm

India's economic growth forecast for FY26 has been substantially upgraded to 7.0%, a notable increase reflecting lower inflation and improved real wages. This positive revision occurs amidst significant global economic headwinds, particularly the United States' recent steep tariff increases impacting international trade partners, including India. Despite these external challenges and a slowdown in urban demand, domestic tailwinds such as reduced inflation and favorable GST rationalization are bolstering consumption prospects.

External risks persist due to escalating US tariffs, which have already led to a decline in India's exports. The agency highlights the need for faster trade agreements and market diversification. Domestically, while rural consumer sentiment remains marginally positive, urban confidence has weakened, signaling potential stress in non-essential spending. However, subdued inflation is translating into positive real wage growth, supporting stable consumption, especially in rural areas.

Investment demand is projected to remain steady, buoyed by substantial government capital expenditure and investments from public sector enterprises. While certain sectors face a slowdown, key areas like power, logistics, and real estate continue to attract capital. The overall economic activity, though moderating, is expected to stay within expansionary territory, with potential for monetary policy easing if nominal GDP growth undershoots targets.