India's Growth Engine Stays Strong as Global Uncertainty Mounts, Says Sitharaman

Union Finance Minister Nirmala Sitharaman on Sunday said India continues to be the world's fastest-growing major economy, even as rising geopolitical tensions and higher energy prices cloud the country's growth outlook, according to a report by The Economic Times.

India's economy expanded 7.7% in FY26, accelerating from 7.1% in the previous financial year. Growth during the January-March quarter stood at 7.8%, marginally lower than 8% recorded in the preceding quarter but significantly above the 7.3% median estimate in a Bloomberg survey of economists.

The stronger-than-expected GDP numbers have reinforced confidence in the resilience of the Indian economy, despite an increasingly challenging global environment.

Rising Risks to Growth

Higher US tariffs, the prolonged conflict involving Iran, and elevated crude oil prices have emerged as key risks to economic growth.

India remains particularly vulnerable because it imports a large share of its crude oil requirements and depends heavily on trade routes passing through the Strait of Hormuz, a critical global energy corridor.

In addition to external risks, concerns over inflation, tighter financial conditions, and potential weather-related disruptions are also expected to weigh on consumption and investment activity.

Growth Outlook Faces New Challenges

Before tensions in the Middle East escalated, Chief Economic Adviser V. Anantha Nageswaran had projected India's economic growth at 7-7.4% for the current financial year.

However, that outlook has become less certain as the Iran conflict enters its fourth month with no clear diplomatic resolution in sight between Washington and Tehran.

Following the release of the GDP data, Nageswaran said India could regain growth momentum and return to an expansion rate above 7% by FY28, provided macroeconomic stability is maintained and supply-side reforms continue.

His remarks came shortly after the Reserve Bank of India revised its FY27 growth forecast downward to 6.6% from the 6.9% estimate announced in April.

The central bank cited rising energy and commodity prices, along with persistent supply-chain disruptions linked to the conflict in West Asia, as reasons for the downgrade.

Despite these headwinds, policymakers remain optimistic that India's strong domestic demand, investment momentum, and structural reforms will help sustain its position as one of the world's fastest-growing major economies.

Speaking at the Rajya Sabha on Saturday, Sitharaman said the government remains committed to building a resilient and self-reliant India by accelerating economic growth while ensuring that the benefits of development reach all sections of society.

Replying to a discussion on the Union Budget, Sitharaman said the government has successfully maintained a high growth trajectory while keeping inflation under control.

She highlighted that the National Statistics Office (NSO) has projected India's economy to grow by 7.4% in FY26, underscoring the country's strong economic momentum.

The finance minister also pointed to easing price pressures, noting that Consumer Price Index (CPI)-based inflation had moderated to 2%. According to Sitharaman, the combination of robust economic growth and subdued inflation reflects the strong macroeconomic fundamentals of the Indian economy and the effectiveness of the government's policy measures.