India Maintains Strong Growth Amid External Risks

International organizations also continue to offer a favorable outlook for the country. In its July forecast, the International Monetary Fund expects India’s economy to grow by 6.4% in fiscal year 2026 and by around 6.7% in 2027. IMF officials point to resilient domestic economic activity and a more balanced growth structure than in previous periods. India remains one of the key drivers of global economic expansion, particularly against the backdrop of more moderate growth in China and developed economies. (Source: International Monetary Fund, 8 and 9.07.2026).

Positive momentum is also evident in the external sector. In July, India’s balance of payments surplus rose to $20.8 billion, compared with $0.3 billion a year earlier. An important factor was the inflow of foreign currency following measures by the Reserve Bank of India to attract overseas deposits (Source: Reserve Bank of India, 15.09.2026; Reuters, 15.09.2026).

However, significant risks remain. India imports a large share of the oil it needs, so rising global energy prices quickly affect inflation, the trade balance and budget expenditures. In August, consumer inflation accelerated to 4.82%, up from 4.45% in July, while core inflation rose to 4.2%. This has already strengthened expectations that the Reserve Bank of India may tighten monetary policy. The IMF specifically identifies high oil prices and a weak monsoon season as major risks to growth in fiscal year 2027. (Source: International Monetary Fund, 21.07.2026; Reuters, 14.09.2026).

A key strength of the Indian economy is the combination of domestic demand, investment and an expanding services sector. This structure makes growth less dependent on any single source and allows the economy to maintain a strong pace even when external conditions deteriorate. Energy dependence remains a weak point, however. A prolonged period of high oil prices could accelerate inflation, worsen the external balance and force the central bank to keep interest rates high for longer.

If domestic demand and investment activity remain strong, India is well positioned to maintain growth of around 6.5–7% in 2027 as well. Further acceleration, however, will depend less on short-term stimulus and more on the country’s ability to expand productivity, infrastructure and private investment without increasing inflationary pressure.

Author: Nikita Dmitrievich Klevanets, Assistant at the Department of World Economy and International Finance, Financial University under the Government of the Russian Federation.