India’s economy has remained steady, with key indicators showing signs of robust expansion despite the West Asia conflict, suggesting that the government’s handling of the situation helped the country remain largely insulated from the shock.
The US-Iran peace deal has also added to optimism, with several agencies beginning to raise their growth estimates for Asia’s third-largest economy. The research arm of global investment bank Goldman Sachs has raised India’s FY27 growth estimate to 6.5 percent and projected lower inflation on the back of easing global crude oil prices.
Robust GDP growth, healthy manufacturing and services activity, strong vehicle sales and buoyant GST receipts indicate that domestic demand and investment remain on track. Strong exports, supported by a diversification strategy, have also added strength to India’s macroeconomic fundamentals.
Non-food credit growth has also remained elevated, pointing to a sustained consumption push in the economy.
The economy grew 7.7 percent in 2025-26, but war clouds in West Asia had raised doubts about faster expansion in the current fiscal year. With tensions easing, there is now a view that growth could remain around 7 percent, while some policymakers believe it could even touch the 8 percent mark if there are no major global disruptions. India remains one of the fastest-growing major economies.
Industrial output growth has remained strong, rising to a five-month high of 5.1 percent in May, with manufacturing, electricity and gas supply showing robust expansion.
The government has kept its focus on fiscal consolidation and resisted pressure to announce a large stimulus package in response to the US-Iran conflict. Instead, it focused on maintaining supplies and front-loading infrastructure spending in the first two months of the fiscal year.
The Centre spent more than a fifth of its budgeted capital expenditure in the first two months of the year, compared with 19.7 percent during the same period last year. Tax revenue collection stood at 12.1 percent of Budget Estimates, only slightly lower than 12.4 percent a year earlier.
Economists had expected the fiscal deficit to slip to 4.6 percent of GDP this fiscal year, but normalisation of global conditions may help the government meet its target of 4.3 percent.
The Moneycontrol Eco Pulse index rose to 54.5 in May from 51.2 in April, signalling a strengthening of economic activity. A reading above 50 indicates expansion, while a value below 50 points to contraction relative to the long-period trend. The rebound suggests that the economy regained momentum after signs of moderation in April, driven by stronger consumer demand, improving industrial indicators and resilient services activity.
Exports have logged double-digit growth over the last two months, indicating that the government’s diversification push may be providing further support to the economy.
The IMF and World Bank, in their outlooks, had noted that the finalisation of trade deals with the UK, the EU and the US is also likely to help India tide over external uncertainty. The India-UK free trade agreement is expected to come into force this month.
Officials said the government’s capital expenditure push has focused on core infrastructure. Roads, railways, telecom, defence and other infrastructure sectors remain central to the Centre’s public investment plan.
Analysts said deft economic management, with different government departments and ministries playing their part, helped the economy navigate the impact of geopolitical tensions. Measures taken by the Centre and the Reserve Bank of India have helped strengthen growth impulses while making India a more attractive investment destination. The central bank has announced a raft of measures to attract overseas capital inflows, which experts say will help support the external sector.
While several economies have taken a hit from the impact of the US-Iran war and high energy prices, the Indian economy has emerged largely unscathed.
“The Indian economy has demonstrated notable resilience in the face of global shocks in the post-pandemic era. This resilience reflects a combination of structural reforms, agile policymaking, prudent macroeconomic management, and sustained government support for growth,” DK Joshi, chief economist at ratings agency Crisil, told Moneycontrol.
Joshi said a strong focus on public investment in infrastructure, alongside fiscal consolidation, the benefits of reforms such as GST, incentives for manufacturing through the Production-Linked Incentive scheme, and the rapid expansion of digital infrastructure have strengthened the economy’s foundations.
“Healthier balance sheets across banks and corporates have improved the economy’s capacity to absorb shocks. Recent measures to attract foreign capital flows are expected to smoothen financing of the current account deficit and support the rupee,” Joshi said.
However, some challenges remain. A patchy monsoon could weigh on the crucial farm sector and hurt overall growth, including in the rural economy, which has remained resilient so far. Price pressures could also intensify if rainfall remains below normal.
Experts said resolution of the India-US tariff issue could add fresh momentum to growth and investment. Commerce and Industry Minister Piyush Goyal has said negotiations on the India-US trade deal have narrowed to the final “one percent” of unresolved issues. There are expectations that a deal could be signed soon.
Discover the latestBusiness News,Sensex, andNiftyupdates. ObtainPersonal Financeinsights, tax queries, and expert opinions onMoneycontrolor download theMoneycontrol Appto stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.