India can return to over 7% growth path in FY28: CEA V Anantha Nageswaran

West Asia crisis may weigh on FY27 outlook, says Nageswaran

India’s economy will return to 7 per cent-plus growth in 2027-28 (FY28), or as soon as external conditions permit, Chief Economic Advisor V Anantha Nageswaran said on Friday, arguing that macroeconomic (macro) stability measures would help restore the economy to a sustained high-growth path even as the West Asia crisis may have altered the near-term outlook for 2026-27 (FY27).

 

“Even if the growth were to slip below 7 per cent as the Reserve Bank of India (RBI) forecast suggests, these macro stability measures and supply assurances will bring us back to the 7 per cent plus growth track in FY28 or as soon as external conditions permit,” he said, pointing to various government measures across energy, trade, agriculture, and industry aimed at cushioning the impact of the West Asia crisis.

 

 

Speaking at a press conference following the release of India’s provisional gross domestic product (GDP) estimates for 2025-26 (FY26), Nageswaran observed the “gratifying” pickup in private final consumption expenditure and a gross fixed capital formation growth rate of 8.2 per cent, describing it as a “good pickup” that continued into the quarterly numbers.

 

India’s real GDP grew 7.7 per cent in FY26, with the fourth quarter (January-March/Q4) expanding 7.8 per cent.

 

The numbers came after the RBI earlier in the day revised its FY27 real GDP growth forecast down from 6.9 per cent to 6.6 per cent, with a downside risk attached, and raised its Consumer Price Index inflation forecast to 5.1 per cent, with an upside risk. “That seems to be a fair assessment of the situation by the central bank, and we have no reason to second-guess them at this point,” Nageswaran said.

 

Nageswaran said the finance ministry would not provide a point estimate for growth at this stage and would instead use the RBI’s projections as the base while accounting for the upside and downside risks flagged by the central bank.

 

He said the West Asia crisis had complicated the outlook for FY27, even as India’s FY26 numbers reflected resilience in both demand and supply. “It will be premature to come to conclusions about the direction that growth and inflation outcomes would take,” he added.

 

Looking at the GDP numbers, Nageswaran said most high-frequency indicators from January through April pointed to mild-to-strong growth, suggesting continued momentum in domestic demand and activity. He cited urban and rural automobile sales, steel, cement, capital goods, and infrastructure goods as holding up.

 

Crucially, he said this resilience was “reassuring” as the data reflected the position two months after the West Asia conflict broke out. He suggested this may not be coincidental, pointing to the possible impact of structural reforms accumulated over more than a decade.

 

“There could be lagged effects of the various structural reforms, not only of the past decade but also after the pandemic,” he said, adding that continued public capital expenditure and supply-side infrastructure investments made by the government over the past 10 to 12 years had contributed to the resilience.

 

On policy, Nageswaran outlined measures ranging from Customs duty waivers on 40 petrochemical products to an emergency credit guarantee scheme for micro, small, and medium enterprises, fertiliser availability secured for over 50 per cent of kharif season requirements, and logistics support for exporters. He also flagged potential trade agreements with the UK, the European Union, and the US as factors that “will continue to boost export prospects in an otherwise challenging global trade environment”.

 

At the same time, he cautioned that external and domestic risks continued to cloud the outlook. “The overall trade deficit widened in FY26, and a similar trend with potentially wider deficits is possible in FY27,” he said, noting continued pressure on the current account.

 

“We have to wait and see how oil prices evolve, and there is also monsoon-related uncertainty which we have to keep in mind, not only in terms of inflation, but also in terms of what it means for disposable income and private final consumption expenditure going forward,” he added.