India's economy is projected to grow at a steady rate of 6.6% in the fiscal year 2025-26, according to the latest forecast by Deloitte.

The global consulting firm noted that this outlook will depend on a careful balance between domestic tax incentives and unpredictable global trade dynamics.

“Deloitte forecasts growth to be 6.6% as tax stimulus partly offsets the impact of trade uncertainties. India's economic outlook for FY2026 hinges on a delicate balance between evolving trade relations and government efforts to boost domestic consumer demand,” the firm noted.

Deloitte observed that the Indian economy demonstrated resilience, even as growth slowed to 6.1% year-on-year up to the third quarter of FY2025.

This deceleration was largely attributed to factors such as election-related uncertainty, atypical rainfall in the first half of the year, and fluctuations in global trade.

Nevertheless, updated figures indicate that FY2023-24 saw a solid 9.2% growth, driven primarily by strong domestic demand.

Recent improvements in indicators like goods and services tax (GST) collections, automobile sales, and fast-moving consumer goods (FMCG) sales point to solid underlying momentum in the Indian economy.

In addition, Deloitte noted that in FY2026, India's economic trajectory will be shaped by two contrasting forces.

On one side, tax incentives announced in the Union Budget 2025 are expected to stimulate consumer spending.

The government's decision to implement income tax cuts, resulting in an estimated annual revenue loss of 1 trillion Rupees, is aimed at enhancing disposable income for middle-class households and encouraging greater consumption.

On the other hand, uncertainties in global trade also present a significant risk to India's growth outlook. Indian exports to the US are subject to a 10% ad valorem base tariff, which, when combined with the 2023 trade-weighted average Most Favored Nation (MFN) tariff rate of 2.2%, results in an effective tariff rate of 12.2%.

An additional reciprocal tariff of up to 16%, which is currently paused for three months, could further raise the effective tariff to 28.2% by the end of FY26.

Deloitte added that much of India's economic performance will depend on the outcome of upcoming US-India trade negotiations.

“Depending on how effectively India navigates the upcoming bilateral agreement, total reciprocal tariffs could range from a high of 26% to a more moderate 10%, or land somewhere in between.”

Deloitte maintains a cautiously optimistic outlook, highlighting that while trade challenges may affect export performance, domestic demand, driven by tax cuts, could help sustain India's growth momentum in FY26.