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    Explained: How Policy Stimulus Could Keep India’s Growth Engine Running In 2026

    2 hours ago

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    Indian economic growth is expected to stay robust going into 2026, supported by both monetary and fiscal interventions, according to a report by Standard Chartered. Policy stimulus, both monetary through frontloaded policy rate cuts and liquidity injections, and fiscal via income tax cuts in the Budget and the GST rationalisation of rates, is likely to support a revival in domestic demand, it argued in the report titled 'Outlook 2026: Ride the Recovery Wave'.

    These measures offset the negative impact on growth from US trade tariffs and global growth slowdown, it has asserted. Nevertheless, India's medium-term outlook remains strong on past policy measures.

    In Standard Chartered's view, Consumer Price Index (CPI)-based inflation is likely to trend lower than the RBI's medium-term target of 4 per cent amid modest crude oil and food article price pressures and lower consumer prices across the board on GST rate cuts.

    "In our assessment, policy remains supportive of growth in 2026 amid a slew of policy measures taken by the RBI (125 bps repo rate cuts, Rs 10 trillion of liquidity injection and dollar-rupee swaps of USD 16 billion) and the Government (income tax cuts and GST rate rationalisation 1 per cent of GDP)," the report read.

    These measures are likely to trigger a decisive upward shift in growth expectations through a consumption-led recovery, with positive "upgrades/surprises" likely in the months ahead, it added.

    Key risks to the macro-outlook are high trade tariffs and global trade disruption; and delayed growth recovery. Economic activity was mixed in 2025 in India. India's GDP growth was robust at 8.0 per cent in H1 2025-26 compared to 6.4 per cent in 2024-25. "We expect India's real GDP growth to become more broad-based in 2026," it said.

    India's consumer price inflation eased significantly in 2025, owing to a sharp fall in food prices, averaging 2.3 per cent in 2025 (until November 2025) compared to 4.9 per cent in 2024.

    The RBI cut the repo rate by 125 basis points in 2025 to 5.25 per cent. Further, the RBI revised its GDP growth forecast upward by 50 basis points to 7.3 per cent in 2025-26 and revised its average inflation forecast for 2025-26 downwards by 60 basis points to 2.0 per cent in its latest December monetary policy review.

    (This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)

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