Low Inflation Supporting India's Economic Growth, Says Modi Adviser

India's economic growth remains robust, with the country projected to grow at 6.6% in 2026 despite challenging global conditions. This growth is supported by strong private consumption and public investment, which are offsetting the impact of high US tariffs. India is expected to remain the fastest-growing major economy globally.

The Indian economy is showing resilience and is expected to remain the world's fastest-growing, supported by low inflation and financial stability, according to Shaktikanta Das, a key adviser to Prime Minister Narendra Modi. Inflation remains below the central bank's target, leaving room for further interest rate cuts, which could further support growth.

Recent policy measures, including income tax cuts and goods and services tax (GST) rationalisation, are expected to provide additional momentum to near-term growth. The Reserve Bank of India (RBI) has also kept interest rates low, supporting economic expansion.

Why Did This Happen?

India's economic resilience stems from strong domestic consumption and public investment. Despite the impact of US tariffs, India has managed to maintain growth due to demand from other major markets such as Europe and West Asia. The country's economic growth is also supported by its relatively low inflation.

The United Nations has upgraded India's economic growth projection for 2026 to 6.6% from 6.4% previously. This upgrade is attributed to resilient private consumption and strong public investment.

What Are Analysts Watching Next?

India's economy is expected to grow at 6.6% in FY27, according to the UN. This growth will be supported by continued low inflation and stable economic policies. The Indian economy is also expected to benefit from recent reforms and trade agreements.

Investors are closely watching how India manages its trade relations with the US and other countries. The US has imposed a 50% tariff on India, including a 25% penalty for importing Russian oil. However, demand from other markets is expected to cushion the impact.

India and the US have had ongoing negotiations for a trade deal, but progress has been slow. The US has pushed for a deal, with Commerce Secretary Howard Lutnick stating that India missed a crucial window for negotiations. India's government has denied these claims and highlighted that Modi and Trump spoke multiple times in 2025.

India's economic policies and trade relations will continue to be a key factor for global investors. The country's growth is expected to outpace many other major economies, despite global headwinds. The US is expected to remain a critical market for India, even as negotiations continue.

India's economy is also expected to benefit from its domestic reforms and policy initiatives. These include tax cuts, GST rationalisation, and lower interest rates. These measures are expected to support near-term growth and help maintain low inflation.

India's economic growth is important for global investors as it provides a stable and growing market. The country's resilience in the face of global headwinds is a positive sign for investors looking to diversify their portfolios. India's growth is expected to continue to outperform many other major economies.