India poised to reap rewards of reforms after a challenging year

As 2026 begins, India’s economy finds itself navigating a difficult global backdrop marked by trade tensions, geopolitical uncertainty and shifting supply chains. Yet a series of swift reforms and policy recalibrations over the past year have positioned the country to ride out these headwinds with growth expected to remain firmly above 7%, reported TOI.

Now close to the $4-trillion mark, Asia’s third-largest economy has surprised many observers by holding its course even as global growth slowed. After a strong 8.2% expansion in the July–September quarter, several multilateral agencies, brokerages and economists have raised their growth forecasts for the current financial year, which ends in March.


The emphasis in the coming year will be on preserving this momentum and, where possible, accelerating it to stay aligned with India’s long-term ambition of achieving developed-nation status by 2047.

A key near-term variable remains the resolution of the tariff dispute with the United States. A settlement, expected in early 2026, could unlock faster export growth and lift investor confidence, improving the broader investment climate.

Despite the prolonged uncertainty created by US tariffs linked to India’s purchases of Russian oil, sentiment has improved in recent months. Global technology majors such as Amazon and Microsoft announced large investment plans toward the end of 2025, including the development of data centres, reinforcing confidence in India’s medium-term growth story.

Macroeconomic conditions have also remained supportive. Inflation has stayed under control, giving the Reserve Bank of India room to ease interest rates to support growth. Price pressures are expected to remain muted for now, helped by relatively moderate global crude oil prices. India imports nearly 80% of its crude oil requirements.

Attention is now shifting to the Union Budget in February, where expectations are building around further steps to simplify regulations and improve ease of doing business. The government has already rolled out several major reforms, including new labour codes, GST rate rationalisation and a revamped income tax law. Economists say maintaining this pace of reform will be crucial as global uncertainties persist.

“The year 2025 brought about a lot of challenges for India. Be it trade tariffs or geopolitical conflicts, India turned turbulence into transformation by bringing in reforms, and building new trade and investments relationships through the year. The efforts resulted in India growing at 8% in the first half of FY26. India's playbook of reforms and trade recalibration helped India remain resilient amid global uncertainty,” said Rumki Mazumdar, economist at consulting firm Deloitte India.

Looking ahead, she said the task for policymakers will extend beyond chasing headline growth numbers. “As 2026 dawns, the challenge will not be just growth, but sustaining it through both reforms and strategic bets. We remain optimistic about India's growth and expect more reforms on the supply side to boost the economy,” Mazumdar said.

The new year will also bring changes to how India tracks its economic performance. Authorities are expected to roll out an overhaul of GDP estimates, the index of industrial production and consumer price index data, along with a change in the base year—an exercise that could further reshape how the economy’s progress is measured in the years ahead.

With inputs from TOI