Robust Domestic Demand Keeps India’s Growth Prospects High

The latest World Economic Forum outlook places India at the forefront of growth potential among all regions surveyed. A remarkable 98% of the leading economists expect at least moderate expansion of the Indian economy within the next twelve months, and 74% are confident of strong or very strong growth—up from 52% in May.

The forum has raised its FY 2026‑27 growth estimate to 6.7%, reflecting the continued vigor of domestic consumption. While strong internal demand lifts the outlook, analysts warn that high energy prices could still weigh on the trajectory.

Inflation expectations have softened since May. Over the coming year, 55% of respondents anticipate moderate price pressures, while 45% expect higher inflation, a shift from May when 61% warned of high or very high inflation. August’s consumer price index rose to 4.8% year‑on‑year, staying inside the 2‑6% target corridor but above the medium‑term goal of 4%.

Monetary policy is predicted to remain unchanged for 67% of economists, with 24% signaling a possible tightening. The policy rate held at 5.25% in August, indicating a neutral approach. Fiscal policy also appears steady; 72% see no change, while 22% foresee a modest easing.

Despite the positive macro picture, equity markets lag, with the Nifty 50 down 7.9% from the start of the year to 19 August. Labor market expectations are mixed: 70% of experts do not expect a shift in unemployment over the next year, 17% foresee a rise, and 13% anticipate a fall. The unemployment rate for those aged 15 and above slipped from 5.1% in July to 5.0% in August, and labour‑force participation rose from 55.4% to 55.6%.

The WEF’s findings link the combination of strong growth and inflation staying within the target band to the prevailing confidence in policy stability, while stressing the importance of continued job creation.