India is expected to maintain economic growth of around 7 per cent despite wars, tariff-related uncertainties and disruptions to global energy and fertiliser supplies, Union Finance Minister Nirmala Sitharaman has said, highlighting the economy’s resilience in an increasingly uncertain global environment.
Addressing members of the Indian diaspora in Chicago during her US visit, Sitharaman said India had recovered strongly from the Covid-19 pandemic and continued to record growth of 7 per cent or more even as the global economy encountered successive shocks. She said the current financial year was also expected to see growth in broadly the same range.
Her assessment is somewhat more optimistic than the Reserve Bank of India’s latest forecast. The RBI on August 5 projected real GDP growth of 6.7 per cent for 2026-27, raising its estimate by 10 basis points from June. The Economic Survey 2025-26 had projected FY27 growth in a range of 6.8-7.2 per cent and estimated India’s medium-term growth potential at around 7 per cent.
Hormuz disruption a major challenge
Sitharaman identified the disruption around the Strait of Hormuz as one of the significant challenges confronting India because of the country’s dependence on the route for energy and fertiliser supplies.
She said nearly 80 per cent of the fertilisers consumed by India — including urea, diammonium phosphate and potash — were imported through the Hormuz route, leaving supplies vulnerable when shipping and trade were disrupted.
The government, she said, had arranged supplies through alternative routes and ensured adequate stocks for farmers without passing the additional procurement cost on to them. Sitharaman said the Centre continued to provide a bag of urea to farmers for about Rs 300 even though its procurement cost was around Rs 3,000, with the difference being borne as subsidy.
She also said the government had worked to ensure energy availability for households despite disruptions to international supplies. The measures, however, came at a significant fiscal cost as India had to procure essential commodities under difficult global market conditions.
Reforms, investment to support domestic economy
The finance minister said the government would continue pursuing reforms while strengthening domestic sources of growth through capital expenditure, citing its multiplier effect on economic activity.
India is also pursuing bilateral trade agreements and bilateral investment treaties with several countries as uncertainty surrounding the multilateral trading system grows. Sitharaman said multilateral institutions had become slow in responding to rapidly changing economic conditions, increasing the importance of bilateral economic engagement.
The broader economic data provide some support for the government’s confidence, although external risks remain significant. The Economic Survey estimated real GDP growth at 7.4 per cent in 2025-26, supported primarily by consumption and investment. Private consumption accounted for 61.5 per cent of GDP, while public investment and improving private investment intentions helped sustain activity.
Independent assessments, however, underline the uncertainty surrounding the outlook. While EY has projected 7-7.2 per cent growth for FY27, the RBI’s forecast remains at 6.7 per cent. The difference highlights the extent to which energy prices, geopolitical developments, global trade conditions and domestic demand could determine the eventual outcome.
Debt reduction remains priority
Sitharaman also emphasised the government’s commitment to fiscal consolidation, saying India had met the fiscal deficit trajectory it had set for itself and would now focus on bringing government debt closer to 50 per cent of GDP by 2030.
She argued that fiscal consolidation was being pursued without reducing resources for welfare programmes. The government’s strategy, she said, was to combine fiscal discipline with continued expenditure on infrastructure and social priorities.
The finance minister linked the growth and reform agenda to India’s ambition of becoming a developed economy by 2047, saying the country had roughly two decades to achieve the objective and would require reforms at greater “speed and scale”.
Sustaining growth near 7 per cent would keep India among the fastest-growing major economies, but the longer-term challenge extends beyond headline GDP expansion. Higher investment, employment creation, productivity improvements and resilience to external shocks will be crucial if the country is to translate rapid economic growth into its 2047 development ambitions.