New Delhi 

India is likely to remain among the world’s fastest-growing major economies, supported by strong structural fundamentals such as rapid digitisation, technological progress and favourable demographic trends, according to the Economic Outlook 2026 released by the Mastercard Economics Institute (MEI).

The report projects that India’s economic growth will stabilise closer to its long-term trajectory in 2026, with real GDP growth expected to moderate to 6.6 per cent, while inflation is forecast to rise to 4.2 per cent. This comes after a strong anticipated performance in 2025, when the economy is estimated to grow by 7.8 per cent, with inflation easing to 2.2 per cent.

According to MEI, the Indian economy is transitioning from a phase of above-trend growth to a more sustainable and balanced pace. The outlook highlights that domestic policy initiatives, combined with demographic advantages and continued digital expansion, are expected to underpin economic activity over the medium term.

The report notes that policy measures such as early-stage monetary easing, reforms in income tax structures and rationalisation of Goods and Services Tax (GST) rates could provide a boost to household consumption. These steps are likely to strengthen domestic demand and support overall economic momentum.

In addition, targeted government support for exports may help cushion the economy against potential global disruptions and volatility in external markets. MEI also pointed out that easing inflationary pressures due to softer global commodity and goods prices could further reinforce India’s growth resilience.

Structural drivers remain a key strength, the institute said, emphasising that digitisation, advances in technology and a young, expanding workforce continue to position India favourably among large global economies. These long-term factors are expected to sustain growth even as near-term conditions normalise.

However, the outlook also flagged external challenges. MEI warned that elevated tariffs in the United States could pose risks to labour-intensive sectors such as textiles, gems and jewellery. The report also highlighted concerns for the IT services industry, noting that stricter immigration policies may affect workforce mobility, travel flows and remittance inflows.

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Given these uncertainties, progress on the ongoing US–India Bilateral Trade Agreement will be closely watched in 2026. The report observed that while global shifts present challenges, they also create opportunities for India to diversify supply chains and expand goods trade through bilateral and regional agreements. This, in turn, could drive growth in global capability centres and boost economic activity in Tier 2 and Tier 3 cities, MEI noted.