Moody’s Predicts India’s Growth at 7% in 2025, Easing to 6.4% in 2026

Global rating agency Moody’s has projected India’s real GDP growth at 7% in 2025, followed by a moderate easing to 6.4% in 2026. This places India among the fastest-growing major economies in the world for the next two years. The growth momentum is expected to be sustained by robust domestic consumption, infrastructure-led investments, and broad macroeconomic stability, despite the presence of global uncertainties.

Drivers of India’s Economic Momentum

1. Strong Domestic Demand

Private consumption remains the backbone of India’s economic growth. Rising incomes, expanding middle class, and urban demand are expected to fuel spending across sectors such as retail, services, housing, and transport.

2. Infrastructure Investment

Government-led capital expenditure continues to drive growth in sectors like roads, railways, and urban transport. High public investment is also crowding in private investment in logistics, energy, and digital infrastructure.

3. Export Diversification

India is expanding its export markets beyond traditional regions. Sectors like electronics, pharmaceuticals, and services are helping reduce dependency on limited geographies, thereby building economic resilience.

4. Stable Macro Indicators

India maintains a manageable fiscal deficit, controlled inflation, and stable currency, with healthy foreign exchange reserves. These factors enhance policy flexibility and investor confidence.

Why Growth Will Ease in 2026

Despite strong fundamentals, growth is expected to slow to 6.4% in 2026 due to,

• Base effect from a high-growth 2025
• Weak global trade and financial tightening impacting exports and capital flows
• Cautious private sector investment, especially in manufacturing and infrastructure
• Structural bottlenecks such as labour skill gaps, regulatory delays, and land access challenges

This softening is considered part of a natural economic cycle, as the economy transitions from recovery-led to investment-led growth.

Relevant Static Data

• India’s projected GDP growth (2025): 7.0%
• India’s projected GDP growth (2026): 6.4%
• Main growth drivers: Domestic consumption, government infrastructure spending, macroeconomic stability
• Risks to growth: External slowdown, investment bottlenecks, base effect
• India’s global position: Among top-performing large economies through 2025–26