☕ TL;DR
- The Surprise: India pegs FY26 GDP growth at 7.4%, beating the previous year’s 6.5%.
- The Headwind: This comes despite a crushing 50% tariff on exports to the US.
- The Pivot: Cooling inflation (2.0%) allowed the RBI to cut rates, fueling a domestic-led rally.
The Scoop: 7.4% in a Sea of Red 📊
While the global economy tiptoes around trade wars, India just posted a growth estimate that screams resilience. The government’s first advance estimates project 7.4% GDP growth for the fiscal year ending March 2026.
Compare this to FY2025’s 6.5%—a figure that marked the weakest growth since the pandemic. The trend line has reversed upwards. Even the IMF was conservative, forecasting 6.6% due to the stalled US trade deal. India has effectively outperformed global expectations by nearly 80 basis points.
The Headwind: That 50% Tariff Wall 🧱
Context matters. India isn’t growing in a vacuum; it’s growing against a 50% tariff regime imposed by the US since last August.
Usually, a trade barrier of this magnitude on a major export partner would cripple an emerging market. Yet, the data shows distinct decoupling:
- Q1 (June): 7.8% Growth
- Q2 (Sept): 8.2% Growth
The “tariffs will crush India” thesis is currently being invalidated by the data.
The Catalyst: Domestic Engines Firing 🇮🇳
How do you offset an export drag? You ignite the domestic engine.
- Government Capex: Public spending is projected to rise 5.2%, a significant jump from the previous year’s 2.3%. The state is stepping in where foreign demand is lagging.
- Consumer Resilience: Private consumption remains robust at 7.0%. While slightly down from 7.2%, it proves the Indian consumer is still spending.
- Monetary Easing: With CPI forecast to drop to 2.0% (from 2.6%), the Reserve Bank of India (RBI) had the room to cut the policy rate by 25 bps to 5.25%.
This is a classic “Goldilocks” scenario: Growth is up, Inflation is down, and Liquidity is easing.
The Verdict: Buy the Resilience? 🎯
My Take: Overweight Domestic Cyclicals.
The data suggests India is successfully pivoting from an export-sensitive model to a domestic-demand fortress. The fears of a trade-war induced recession seem overblown.
- The Play: Position into interest-rate sensitive sectors (Real Estate, Autos, Banks) that benefit from the RBI’s cut and the 7.4% growth narrative.
- The Risk: The US trade deal negotiations are still a live wire. If the tariffs escalate or broaden, the domestic buffer might wear thin.
For now, India looks like the only clean shirt in the emerging market laundry.
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Please do your own research before making any investment decisions.