Archive · 29 Aug 2026
India’s Economy Weathers West Asia Shock, But Reforms Remain Essential
India’s economy continued growing even while fighting and problems in West Asia created risks.
The economy may have grown by as much as 8% in the latest quarter.
Tax cuts, lower interest rates and other government actions helped people and businesses spend more.
India also bought energy from several countries so fuel supplies would not run short.
However, some of this growth may be temporary because it depends on tax cuts, cheap loans and strong borrowing.
Businesses are still cautious about building new factories and equipment.
More dependable consumer demand and exports could encourage them to invest.
The country also needs better education, skills, health services and rules that make it easier to create jobs.
These changes could help India achieve stronger growth for a longer time.
India’s GDP growth for the latest quarter could reach as high as 8%, supported by strong autos, credit, exports and corporate earnings data.
Tax cuts, GST changes, interest-rate reductions and regulatory easing helped strengthen economic activity in 2025.
India diversified energy imports during the Middle East conflict, while the government absorbed much of the oil-price shock.
Investment remains subdued: fixed investment is around 32% of GDP, while corporate capital expenditure remains near 10–11%.
The article calls for reforms in education, skills, health, labour rules, tariffs and regulation to support jobs, exports and sustained growth.
- Who
- India’s policymakers, households, businesses and exporters are central to the assessment; the analysis was written by Sajjid Chinoy of J.P. Morgan.
- What
- India’s economy has remained resilient during the West Asia shock, but needs structural reforms to sustain growth.
- When
- The analysis focuses on developments in 2025 and 2025–26, including the latest quarter’s expected GDP result.
- Where
- India, amid the Middle East conflict and changing global trade and energy conditions.
- Why
- Recent growth has been supported partly by temporary fiscal, monetary and credit impulses, while weak corporate investment, job pressures and export challenges threaten longer-term expansion.
- Expected latest-quarter growth
- GDP growth could be as high as 8%.
- Policy support in 2025
- Direct taxes were cut, GST was rationalised, policy rates were effectively reduced by 150 basis points and financial-sector regulation was eased.
- Energy response
- India diversified crude and LNG imports, including supplies from Russia, the United States and Oman.
- Fixed investment
- Fixed investment remains around 32% of GDP, its average over the past decade.
- Corporate capital expenditure
- Corporate capex remains around 10–11% of GDP, with no discernible increase among the top 1,000 listed companies in 2025–26.
- Household lending
- NBFC lending to households is growing at 20%, while banks’ unsecured personal lending momentum has risen to 25%.
- Goods exports
- Goods exports have declined from 17% of GDP a decade ago to 11%.