In its latest edition of Economic Outlook report, Deloitte said India entered 2026 in a Goldilocks phase, with macroeconomic fundamentals appearing unusually well balanced, but geopolitical developments altered the global landscape with tensions in the Middle East disrupting critical shipping routes, triggering volatility in commodity prices and weakening investor sentiment.
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This resulted in a wider trade deficit, sustained capital outflows, and a sharp depreciation of the rupee against the US dollar within a matter of weeks.
Against this backdrop, the RBI had last month lowered India’s GDP growth estimates for current fiscal to 6.6 per cent, from 6.9 per cent estimated earlier. GDP grew 7.7 per cent in the previous (2025-26) fiscal.
Deloitte India Economist, Rumki Majumdar said the global environment has become considerably more uncertain.
“While recent geopolitical developments and the RBI’s policy measures may help cushion some of these risks, weather-related uncertainties, particularly the impact of El Nino on agricultural output and food prices, remain an important downside risk,” she said.”Deloitte expects India’s economy to grow between 6.5 per cent and 6.8 per cent in FY2026- 27. Growth is likely to remain moderate in the first half before strengthening in the second half, supported by festive demand, monetary easing, and a gradual stabilisation in global conditions,” Majumdar said.
Despite near-term headwinds, Deloitte remains optimistic about India’s medium-term growth prospects. One of the strongest reasons is India’s accelerated pursuit of Free Trade Agreements (FTAs) with large and strategically important markets, the report said.
“As FTAs deepen, India’s priority must be to convert market access into lasting competitiveness. Greater import resilience should not translate into permanent import dependence. Trade policy must therefore be complemented by industrial policy, world-class infrastructure, stronger domestic supplier ecosystems, easier compliance, and continued investment in innovation and skills to raise domestic value addition over time,” Majumdar said.
Inflation remains one of the key risks to the growth outlook as higher prices of crude oil, fertilisers, essential minerals, and edible oils, together with a weaker rupee, are gradually feeding into domestic prices, the report said.
India’s retail inflation (CPI) surged to an 18-month high of 4.38 per cent in June on higher food and fuel prices.
A weak monsoon could further raise inflationary pressure in the coming months as food prices respond first. Since food accounts for nearly 46 per cent of India’s CPI basket, sustained food inflation can quickly become broad-based by influencing household inflation expectations and wage demands.
“Policymakers therefore face a delicate balancing act. They must contain inflation without relying excessively on subsidies, which would create difficult trade-offs between macroeconomic stability and fiscal discipline,” Majumdar said.