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India's Economy Surges Amidst Low Inflation
20 Feb
Summary
- India's economy poised for strong 7.4% growth in FY26.
- Low inflation provides policymakers with flexibility and room.
- Domestic demand and investment are driving resilient economic momentum.
India's economic outlook has significantly brightened, with strong growth projected at 7.4% for the fiscal year 2026. This positive trajectory is largely fueled by robust domestic demand and increasing investment activities. Policymakers are observing this economic momentum with optimism, especially as inflation has remained unusually soft. Headline Consumer Price Index (CPI) figures were low in recent months, and projections for FY26 indicate it will stay subdued.
The Reserve Bank of India's Monetary Policy Committee, in its February meeting, noted the economy's resilience despite global volatility. The committee decided to maintain a neutral monetary policy stance, signaling patience as they await clearer data and the full transmission of previous easing measures. Projections for the first half of fiscal year 2027 have been nudged up, anticipating continued growth.
Further contributing to the favorable economic climate are expected increases in exports and capital inflows, bolstered by recent trade agreements. Underlying inflation, excluding volatile components, remains muted, suggesting minimal risk of the economy overheating. This scenario provides the central bank with considerable room for maneuver on its monetary policy.
