Mint Explainer | Will India’s growth momentum hold in 2026?

Mint examines how the economy fared in 2025, and what lies ahead in 2026.Quite strong. The economy expanded at a brisk pace, clocking average gross domestic product (GDP) growth of 7.8% in the first three quarters of the year, with growth in the final quarter (October–December) estimated at 7%. This sets the stage for GDP growth of about 7.6% in calendar year 2025, once again making India the fastest-growing large economy in the world.

By comparison, China is expected to grow at around 5% and the US at about 2%.Importantly, this growth came alongside a sharp moderation in inflation, which fell to 0.71% in November, well below the Reserve Bank of India's lower threshold of 2%.Not at all. The government faced multiple challenges. The US, India’s largest trading partner, imposed steep tariffs that threatened to disrupt bilateral trade.

Hopes of a quick trade deal faded as negotiations stalled. The higher tariffs hit several labour-intensive sectors, including textiles, leather and auto components.The rupee weakened amid the tariff shock and capital outflows, while foreign investors, drawn to more attractive opportunities elsewhere, began pulling money out of India. Despite repeated efforts, private investment remained sluggish, and domestic consumption showed signs of revival only towards the latter part of the year.To revive domestic consumption, the government cut tax rates—reducing personal income tax in February and the goods and services tax (GST) in September.Following the US tariff shock, it also accelerated trade negotiations with other countries to broaden India’s export base.