Despite tariff challenges, India demonstrates economic resilience with robust growth and strategic international partnerships
India's Economy Thrives Amid Global Challenges
India's economy is on an upward trajectory, with a projected expansion of 6.5% in FY26, making it the world's fastest-growing major economy. This growth is driven by strong domestic consumption, services, and manufacturing, accounting for nearly 60% of the country's GDP.
Despite global market volatility, GDP for Q1 FY26 expanded 7.8%, marking a five-quarter high. This resilience is not new to India; reforms, process improvements, and infrastructure-led expansion have allowed the country to enhance its growth advantage over developed economies, according to S&P Global.
One of the key drivers of India's growth is the localization of the nuclear value chain. Efforts are being made to tap into vast thorium reserves in India, which could potentially provide a sustainable and abundant source of nuclear fuel.
India's economy is also benefiting from the expansion of private credit markets. These markets are filling financing gaps left by traditional lenders, providing much-needed capital for businesses and infrastructure projects.
However, India has faced challenges in the international trade arena. The tariff blow from the US led to a steepest monthly fall of exports to the US in August, down 16.3% from July. To cushion the blow, India has been deepening its engagement with strategic trade partners such as the Comprehensive Economic Partnership Agreement (Cepa) with the UAE. The Cepa has boosted bilateral non-oil trade, crossing $38 billion in H1 2025.
The negotiations for the CEPA between India and the United Arab Emirates were concluded in May 2022. Sunil Ambalavelil, a Dubai-based business and legal consultant, noted that these strategic trade partnerships are proving critical shock absorbers, ensuring that India is not overly dependent on any single trade partner.
India is also strengthening its position in the global shipbuilding industry. The government aims to lift shipbuilding to a strategic priority, with the goal of becoming one of the top five globally by 2047. To achieve this, the government plans to expand capital expenditure beyond the budgeted Rs11.21 trillion for FY26, with railways, highways, ports, and shipbuilding as key priorities.
India's gold reserves are substantial, with nearly 32,000 tonnes across households, the Reserve Bank of India, and temples, valued at about $3.5 trillion. This wealth, combined with the government's push on infrastructure and reforms, has further entrenched India's economic buffers.
Reforms to the tax structure, such as the Goods and Services Tax (GST) overhaul, have also left an additional Rs2 trillion in the hands of citizens. GST collections have climbed to Rs22.08 trillion in 2025, up sharply since its launch, with taxpayers increasing to 15.1 million from 6.5 million.
India is also looking towards greater integration with BRICS, providing alternative channels to sustain trade in the face of global challenges. India is poised to become the second-largest market for data center power demand in Asia-Pacific within two years, further cementing its position as a key player in the digital economy.
In conclusion, India's economy is showing remarkable resilience in the face of global challenges. The contrast between the 'dead economy' label and the reality of 7.8% GDP growth could not be starker. With a focus on localization, strategic trade partnerships, infrastructure development, and tax reforms, India is well-positioned to continue its economic growth trajectory.
