Indian economy projected to grow at 6.5% in FY26: EY Economy Watch

Amid an ongoing global economic slowdown, India is poised to maintain strong growth momentum, with the economy projected to grow by 6.5% in FY26, according to EY’s latest Economy Watch report for July 2025.

The Organisation for Economic Co-operation and Development (OECD) has lowered global growth forecasts to 2.9% for both 2025 and 2026, citing trade tensions and policy uncertainties. In contrast, India is expected to outpace global averages, supported by strong private consumption, robust public capital spending, and moderate inflation, the report said.

The report also focuses on the growing influence of the BRICS+ bloc, which now includes 10 member countries and nine partners. The group accounted for 42.5% of global GDP in purchasing power parity (PPP) terms and 54% of the global population in 2024.

At the 17th BRICS+ summit in Rio de Janeiro earlier this month, member nations reaffirmed their commitment to strengthening trade in local currencies through a blockchain-based cross-border payment platform. The initiative, aiming to reduce dependence on the US dollar, is expected to enhance intra-group trade, improve financial autonomy, and promote infrastructure investment.

EY projects that BRICS+ could account for over half of global GDP (in PPP terms) by 2030, underscoring a shift in economic power toward the Global South.

India’s manufacturing Purchasing Managers’ Index (PMI) hit a 14-month high of 58.4 in June 2025, while the services PMI reached a 10-month high of 60.4, indicating continued expansion in both sectors, the report said.

Consumer Price Index (CPI) inflation dropped to a 77-month low of 2.1% in June, largely driven by a sharp fall in food prices. However, core inflation ticked up to 4.6%, reflecting rising gold prices, it added.

The Centre’s gross tax revenues grew by 12.1% in April-May FY26, while capital expenditure surged 54.1%, signalling frontloaded investment. Thanks to record RBI dividends, the Centre’s revenue account posted a surplus equal to 34.9% of the budget estimate, despite a notional deficit of ₹5.2 lakh crore.