Finance Minister Nirmala Sitharaman stated that the Indian economy is capable of maintaining growth momentum despite geopolitical instability and supply chain disruptions. She noted that the Indian economy, after contracting by 5.8% in FY2021 during the COVID-19 pandemic, has demonstrated annual growth exceeding 7% over the last five years.
Sitharaman made this statement on Sunday during a speech to the Indian diaspora in Chicago. She emphasized that the expected growth for the current fiscal year is 6.8–7.2%, according to the Economic Survey for FY2026. Meanwhile, the Reserve Bank of India (RBI) projects GDP growth at 6.7% in FY2027. Data on GDP for the June quarter of FY2027 will be published on Monday.
Growth Forecasts and External Factors
The Finance Minister is confident that India will maintain its growth momentum despite geopolitical risks and supply issues caused by the conflict between the US and Iran and the closure of the Strait of Hormuz. She explained that constant monitoring of global uncertainty combined with an understanding of domestic needs has allowed the country to remain stable, unlike many other nations whose calculations have been disrupted.
Initially, disruptions in the Strait of Hormuz affected the supply of essential commodities such as petroleum products, natural gas, and fertilizers, but India managed to reroute its supplies. Furthermore, the government supported farmers by keeping fertilizer prices at previous levels through subsidies, even amid sharp increases in international prices. Sitharaman added that fertilizer stocks for the upcoming season, starting in November, are sufficient.
Capital Attraction and Reforms
The government plans to continue implementing systemic reforms and aims to attract more capital, especially foreign capital, as the economy expands. Although domestic private investment has been boosted by government capital expenditure, India also needs to attract international investment to meet growing capital requirements. Sitharaman reported that she, along with other ministers and the Prime Minister, are negotiating with global funds to showcase achievements and secure their expectations for further clarification.
Last week, Commerce and Industry Minister Piyush Goyal visited Japan, where he sought to mobilize investments totaling 10 trillion Japanese yen (approximately 60 billion US dollars) by 2035. Sitharaman also mentioned ongoing work with several countries on Bilateral Investment Treaties (BITs) and trade agreements.
These efforts to attract foreign capital come against a backdrop of a noticeable slowdown in the inflow of net foreign direct investment (FDI) into India over the past four years. According to RBI data, the net FDI inflow decreased from an average annual level of about $40 billion during FY2020 to FY2022 to $6.95 billion in FY2026.