India’s economy set for a payoff phase—if external risks don't trip it up

Dear reader, as 2025, a year of global tumult and volatility, rolls by, Mint's reporters and columnists look around the corner on what is coming in 2026—to help you know what to expect and prepare for it. Tell us what you think at [email protected].After a year marked by punishing US tariffs, climate-linked disruptions, and global uncertainty, India may finally be approaching a payoff phase.

Economists and policymakers say 2026 could deliver the lagged benefits of tax reforms, aggressive monetary easing, and regulatory changes—placing the economy on a firmer growth footing even as external risks persist.India’s economy grew a robust 8.2% in the September quarter, outpacing smaller peer Indonesia (5%) and the world No. 2 China (4.8%).

For FY 2026, India's growth is projected at 7% or higher by the government and the Asian Development Bank (ADB).Normally, sustaining such momentum over a high base would be challenging. But experts argue that labour reforms, tax relief, easier credit conditions, and a planned overhaul of the customs duty regime could help India defy that pattern—provided global trade tensions do not escalate further.The Reserve Bank of India projects a growth of about 6.75% in the first half of FY27, while the ADB expects 6.5% for the full year—over a high base of around 7.2-7.3% growth estimated for FY26.

In other words, the wide expectation is that India is on a high-growth footing.RBI has already laid much of the groundwork. In 2025, it cut the repo rate by a cumulative 125 basis points and reduced the cash reserve ratio by 100 basis points—its most aggressive easing cycle since 2019.