By Nikunj Ohri and Sarita Chaganti Singh
NEW DELHI, Jan 29 (Reuters) – India’s economy is forecast to grow between 6.8% and 7.2% in the fiscal year starting in April on the back of strong domestic demand, the government said on Thursday, even as global volatility weighs on the outlook.
The finance ministry’s forecast in the annual economic survey represents a slowdown from this fiscal year’s 7.4% projection.
The annual economic survey, presented in parliament by Finance Minister Nirmala Sitharaman, says the outlook for the domestic economy “is one of steady growth amid global uncertainty, requiring caution, but not pessimism”.
The government projects this fiscal year’s growth at 7.4%, beating the 6.3%-6.8% forecast range from last year’s survey.
‘UNDERVALUED’ RUPEE PARTLY OFFSETS IMPACT OF TRUMP TARIFFS
For India, global conditions translate into uncertainties rather than immediate macroeconomic stress. Slower growth in key trading partners, tariff-induced disruptions to trade and volatility in capital flows could intermittently weigh on exports and investor sentiment, the report says.
The report’s growth assessment is broadly consistent with recent analyses on India’s momentum by international agencies.
The report is a precursor to the federal budget on Sunday, which will seek to bolster fast economic growth and buffer the South Asian nation from geopolitical shocks and the tariff uncertainty from Washington that has upended global trade.
President Donald Trump in August slapped a 50% tariff on some Indian goods entering the U.S. In recent months, New Delhi has raced to diversify its market and struck a long-pending trade deal with the European Union, as well as deals with New Zealand and Oman.
Since Trump imposed the levies, the rupee has fallen 5% and is now, according to the economic survey, “punching below its weight”.
“The rupee’s valuation does not accurately reflect India’s stellar economic fundamentals,” the report says, but the “undervalued” currency “offsets to some extent the impact of higher American tariffs on Indian goods.”
REPORT EXPECTS BOOST FROM TAX CUTS, LABOUR OVERHAULS
The weaker rupee does not hurt at a time when inflation in India is exceptionally low, but “it does cause investors to pause”, the survey says, adding that “investor reluctance to commit to India warrants examination”.
The rupee fell to a record low 91.9850 per dollar on Thursday. Foreign investors withdrew a record $19 billion from Indian equities in 2025 and have remained sellers in January.
Thursday’s report was authored by Chief Economic Adviser V. Anantha Nageswaran and his team, which is separate from the group compiling Sunday’s budget.
Investment and consumption are likely to gain strength as firms respond to recent reforms including consumption‑tax cuts, the overhaul of labour laws and steps to open up the tightly controlled nuclear-power sector, the survey says.
“Ongoing trade negotiations with the United States are expected to conclude during the year, which could help reduce uncertainty on the external front,” the report says.
The IMF, in its latest global outlook, raised India’s growth forecast for the coming fiscal year by 0.7 percentage point to 7.3%, while the World Bank upgraded its forecast by 0.9 point to 7.2%.
The Reserve Bank of India, in its January bulletin, said high-frequency indicators point to sustained buoyancy in demand as the new year begins. The central bank has cut interest rates by 125 basis points since February 2025, the most aggressive easing since 2019.
(Reporting by Nikunj Ohri and Sarita Chaganti Singh; Editing by William Mallard)
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