As India enters 2026, it continues to distinguish itself as the world’s fastest-growing major economy, offering a rare combination of scale, stability, and structural reform at a time of global economic uncertainty. While advanced economies grapple with slowing growth, trade disruptions, and geopolitical volatility, India’s macroeconomic fundamentals remain resilient.
Pawan Bhatnagar, Managing Director, Kasvu Consulting analyses India’s Economic Outlook 2025-26 and Opportunities for Foreign Investors and Companies in India.
Sustained Growth Momentum
India’s medium-term outlook remains robust. IMF projections indicate GDP growth of 6.6% in 2025, moderating slightly to 6.2% in 2026, while the World Bank estimates 6.7% growth in FY2026. Growth drivers include continued public infrastructure spending, rapid digitalisation, easing inflationestimated at around 4.3%- and improving rural demand.
At this pace, India is adding approximately USD 1 trillion to its economy every 12–18 months, keeping it on track toward its long-term ambition of becoming a USD 30 trillion economy by 2047.
For foreign companies, this translates into expanding demand across industrial, consumer, infrastructure, and technology-driven segments.
Sectoral Performance and Capital Inflows
The services sector remains the backbone of India’s growth, led by IT and digital services, business process outsourcing, education, and healthcare exports. Manufacturing is gaining momentum as
regulatory frameworks improve and global firms diversify supply chains beyond single-country dependencies.
Investor sentiment remains positive. In June 2025, Foreign Institutional Investors(FII) invested approximately USD 1.05 billion in Indian equities, with inflows concentrated in financial services, energy, IT, and telecommunications.
Foreign Direct Investment(FDI) trends further reinforce confidence. Cumulative FDI inflows since 2000 have exceeded USD 1.09 trillion, while FY 2024–25 inflows surpassed USD 50 billion, representing a year-on-year increase of around 13%. These figures highlight India’s appeal as a longterm investment destination rather than a short-term capital market opportunity.
Sunrise Sectors and Policy Incentives
A defining feature of India’s investment landscape is its focus on future-oriented “sunrise sectors.” The government has identified 14 high-growth sectors where 100% FDI is permitted under the automatic route, supported by targeted Production Linked Incentive (PLI) schemes. These include renewable energy, green hydrogen, semiconductors, electric vehicles, pharmaceuticals, drones, medical devices, electronics, advanced materials, and space technologies.
These priorities align with national initiatives such as Make in India, Atmanirbhar Bharat, and India’s net-zero commitments, while also reflecting global shifts toward Industry 4.0 and clean technologies. Liberal FDI norms combined with performance-linked incentives significantly strengthen the case for localisation, manufacturing, and R&D investments by foreign firms. Kasvu Consulting actively supports international companies- particularly from Finland and Northern Europe- in identifying partnership and market-entry opportunities in clean technologies and defenceadjacent ecosystems.
Political Stability and Business Reforms
Policy continuity remains a key confidence factor. The continuation of the NDA-led government under Prime Minister Narendra Modi has reinforced reform momentum and fiscal discipline. Public capital expenditure continues to play a counter-cyclical role, supporting growth amid global uncertainty, while India’s multi-aligned foreign policy enhances its strategic relevance across Europe, the Global South, and the Indo-Pacific.
India has also made tangible progress in improving its business environment, advancing to 63rd place in the World Bank’s Ease of Doing Business rankings (from 142nd in 2014) and ranking 39th globally in the IMD World Competitiveness Index 2024.
Strategic Takeaways for Foreign Entrants
India’s 6.5–6.7% growth outlook, liberalised FDI regime, and targeted incentives present compelling opportunities in renewables, electric mobility, semiconductors, pharmaceuticals, advanced manufacturing, and sustainability-driven technologies. However, regulatory variations across states, localisation requirements, and global trade uncertainties underscore the need for informed marketentry strategies.
Kasvu Consulting advises foreign companies to prioritise structured partnerships, joint ventures, and phased localisation approaches. High-potential collaboration areas include waste and water management, sustainable packaging, dairy and food processing technologies, clean energy solutions, and security and resilience technologies. With the right local insight and execution framework, India’s demograp