While on one hand the whole world is grappling with economic recession and fear of recession, on the other hand India’s economy is not only standing strong but is also poised to take a new leap. The indications given by the latest Carriage Report on the Indian economy are certainly a relief. According to the report, India’s growth rate is expected to be 7.5% in FY 2026, which is much higher than the global average. While the economies of major countries like America, Britain and the Euro zone are running below their historical averages and China’s growth is also slowing down, India’s performance is nothing short of a miracle.
Why is India finally ahead of the rest of the world?
The report clearly states that India will maintain its momentum despite global challenges and trade uncertainties. The biggest reason for this is the increase in domestic demand and investment. The second quarter saw a strong performance in the manufacturing and construction sectors. This has been fueled by the reduction in GST and increasing demand in the market.
Globally, the average growth rate is estimated to be only 3.1% over the next five years, while India will grow at 7.5% and 7% in the next two fiscal years respectively. This figure shows how deep and strong the foundations of the Indian economy have become.
What will affect your pocket?
The best news for the common man on the inflation front. The report estimates that retail inflation (CPI) may decline to an average of 2.1% in FY2026. This will be possible due to stable food prices and softening commodity prices. Also, the Reserve Bank of India (RBI) has ended 2025 with the most aggressive rate-cut in six years. Benchmark rates have been reduced by a total of 1.25%, which is expected to reduce the burden of home loans and EMIs.
RBI Governor Sanjay Malhotra has also taken a pro-growth stance. The central bank’s confidence has been boosted by GDP growth of 8.2% in the July-September quarter and inflation hitting a historic low of 0.25% in October.
Where do we stand against the dollar?
However, there are also some challenges. The rupee has been under pressure in the past few months due to a widening trade deficit and decline in investment. Delays in the US-India trade deal have also had some impact on market sentiment. But the RBI has shown wisdom and allowed the rupee to adjust gradually instead of intervening too much in the foreign exchange market.
According to the report, the rupee is still around 3% below its real value based on real effective exchange rate (REER). This means that there is no risk of major declines. The rupee is expected to be supported by interest rate cuts in the US and a weaker dollar. With this, foreign investment is expected to increase due to India’s inclusion in the Bloomberg Global Aggregate Index.