A CNBC-TV18 poll of economists suggests the Goldilocks narrative will largely endure next year, though with noticeably less shine than in 2025.
Growth to moderate, but remain resilient
According to the poll, India’s GDP growth is expected to ease to 6.8% in 2026, down from an estimated 7.5% in 2025. However, beneath the average lies a sharply divided outlook. Half the respondents see growth holding above 7%, while the other half peg it at a more modest 6.5%.
Economists in the optimistic camp point to rising consumption driven by GST rationalisation and income tax cuts, expectations of lower interest rates, and early signs of a capex revival—particularly in power and real estate. These factors, they argue, could support a sustained expansion even as global conditions remain uncertain.
The more cautious camp disagrees on private investment. While acknowledging consumption strength, they argue it is not robust enough to trigger a broad-based private capex cycle. Slower government capital expenditure and lingering global uncertainty, they say, will continue to keep private investment tentative.
Nominal GDP improves, but below long-term trend
On nominal GDP—which measures output at current prices—economists see growth rising to 9.7% in 2026, compared with 8.3% in 2025. Yet here too, optimism is restrained. Half the respondents expect nominal growth to remain below 9.5%, well short of the previous decade’s average of over 11%.
Inflation to normalise from record lows
Inflation, unusually subdued in 2025, is expected to normalise next year. The poll pegs CPI inflation at 4% in 2026, up from 1.9% this year.
Once again, views are split. Half the economists expect inflation to remain benign at around 3.8%, while the rest see CPI rising into a 4–4.5% range. Across the board, economists expect consumption growth to outpace investment, with public capex slowing and private capex remaining cautious.
Fiscal consolidation continues, debt in spotlight
On the fiscal front, the government is expected to narrow the fiscal deficit to 4.3% of GDP in 2026 from 4.4% this year, consistent with its long-term consolidation roadmap.
However, the upcoming 16th Finance Commission report could shift the policy focus from fiscal deficit targets to overall debt-to-GDP levels. With India’s debt hovering around 84% of GDP, pressure is building to move closer to an 80% threshold over the medium term.
Bond supply, RBI support and yield outlook
One of the key variables for markets next year will be government borrowing. The Centre and states are expected to raise at least ₹30 trillion via bonds and state development loans—an increase of nearly 8.5% from ₹27.7 trillion this year.
Given concerns over demand absorption, most economists expect the RBI to remain active in the bond market through open market operations (OMOs). Despite this, the 10-year government bond yield is projected to edge higher in 2026, indicating that the overall cost of capital is unlikely to decline meaningfully.
External sector: Stability with lingering risks
India’s current account deficit (CAD) is expected to remain modest at 1.06% of GDP in 2026, broadly unchanged from this year. Strong services exports—particularly from global capability centres (GCCs)—and steady remittances continue to provide a cushion.
The larger concern has been the capital account. Foreign portfolio investors (FPIs) pulled out $15 billion in 2024 and an estimated $17 billion in 2025, pushing the balance of payments into deficit. While reserves have absorbed the shock so far, sustained outflows are not sustainable indefinitely.
The poll offers cautious optimism for 2026, with economists forecasting net inflows of $7–8 billion. Some see inflows as high as $20 billion, while others warn that flows could remain weak or barely positive.
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Rupee seen stabilising after a weak 2025
Persistent capital outflows weighed heavily on the rupee in 2025, leading to a depreciation of nearly 6% against the dollar. Economists now expect relative stability ahead, with the rupee projected to end 2025 at ₹90.4 per dollar and weaken only marginally to around ₹92 per dollar by end-2026.
The wild cards for 2026
Two major uncertainties could upend these projections. First is the fate of a potential India–US trade deal, which economists say is crucial to sustaining growth and investor confidence.
Second is a statistical reset. In February, the Ministry of Statistics is expected to unveil new GDP and CPI series with a revised base of 2022–24, which could lead to significant revisions across growth and inflation numbers.
For now, India enters 2026 with solid macro fundamentals, but the coming year may test how durable the Goldilocks phase truly is.
