India Will Record the Highest GDP Growth Among G20 Nations by FY26: Moody’s Report

Moody’s Investors Service has forecast that India will record the highest GDP growth among the advanced and emerging economies in the G20 group in the fiscal year 2026. The projected growth rate of 6.5% places India ahead of several other major economies. This momentum is largely fuelled by ongoing structural reforms, robust domestic demand, and supportive monetary policies.

The consistent efforts by the government to implement tax reforms and broaden the tax base have contributed to stronger fiscal discipline. Additionally, the monetary easing by the Reserve Bank of India (RBI), aimed at promoting credit growth and investment, is expected to further support economic activity.

Inflation Trends and Monetary Policy Easing

Inflation is anticipated to moderate to 4.5% in FY26, down from an average of 4.9% in FY25. This downward trend provides room for the RBI to adopt a more growth-supportive monetary stance. In line with this, the RBI reduced interest rates by 25 basis points to 6.25% in February 2025, with additional cuts expected in April to further bolster the economy.

Such monetary measures are intended to stimulate private consumption and investment, helping to maintain economic momentum amidst global uncertainties.

Fiscal Relief and Middle-Class Boost

One of the notable policy steps includes the increase in the income tax rebate limit to ₹12 lakh (approximately US$ 14,014), up from ₹7 lakh (around US$ 8,175). This move is set to provide a fiscal relief of ₹1,00,000 crore (US$ 11.68 billion) to the middle-class population, which in turn could boost consumption.

This substantial tax relief aims to enhance disposable income, support domestic consumption, and further reinforce India’s growth trajectory.

India’s Structural Strengths Support Capital Inflows

Moody’s also highlights India’s macroeconomic resilience as a key driver for attracting global capital. The country benefits from:

• A large domestic economy and deep capital markets

• Strong foreign exchange reserves

• Moderate policy credibility and consistent reforms

• A low external vulnerability indicator (61%)

• High share of domestic currency-denominated external debt

These factors limit India’s exposure to external financial shocks and reinforce investor confidence in the economy.

Global Comparison: How India Stands Out

While China’s growth remains export and technology-driven, it grapples with weak domestic consumption, making its growth profile less balanced. In contrast, India’s consumption-led model provides a broader base for sustainable growth.

Among emerging markets, Brazil and India are positioned more favourably compared to nations like Argentina and Colombia, which face elevated risks due to significant foreign currency-denominated debt.

Moreover, although policy shifts in the United States and global trade fluctuations pose potential challenges, India’s diversified economy offers greater insulation from these external shocks, according to Moody’s.

Conclusion

India’s expected position as the fastest-growing economy in the G20 by FY26 underlines its resilient fundamentals, policy reforms, and robust domestic demand. While global uncertainties persist, the country’s economic structure and proactive governance are likely to maintain its growth leadership among peer nations.

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