India’s economy likely to grow by 6.7% in FY26 on cyclical recovery

India’s economy is set to grow at 6.7 per cent in FY26, driven by a cyclical recovery and steady market performance, a new report said.

Cyclical recovery refers to the phase in an economic cycle that follows a recession or slowdown, during which economic activity, consumer spending, and business investments start to rise.

Over the past five years, India has witnessed strong earnings growth, with the NIFTY index recording a 20 per cent compound annual growth rate (CAGR), according to a Lighthouse Canton report.

As the economy moves forward, the next phase of growth will depend on key factors such as government capital expenditure, tax benefits for the middle class, and improved consumer demand.

These elements are expected to support earnings recovery and market confidence in 2025, the report said.

India’s investment-led expansion has played a crucial role in economic growth. While the government continues to focus on fiscal discipline, private sector investments are expected to gain momentum, contributing to long-term stability.

The Reserve Bank of India’s recent 25-basis-point rate cut - the first in nearly five years - signals a supportive stance for economic growth.

“India’s economic engine continues to offer long-term promise, however, 2025 will require greater selectivity and discipline,” said Sumegh Bhatia, Managing Director and CEO of Lighthouse Canton in India.

He added that the investors will need to navigate shifting cycles, watch for inflection points in earnings, and remain anchored in fundamentals as the global order undergoes further transformation.

On the global front, market trends and currency movements will influence India’s financial landscape, as per the report.

The strength of the US dollar and rising global trade activity are shaping investment flows, while gold remains a preferred asset due to its resilience amid global uncertainties.

“Additionally, crude oil prices are expected to remain stable, benefiting India’s import-dependent economy,” the report noted.

In 2025, the focus remains on sustainable growth, disciplined market strategies, and long-term investment opportunities, it added.

Meanwhile India said on Thursday it was studying the impact of the 27 per cent tariff slapped by the US on its imports and vowed to push for a trade deal this year, signalling a conciliatory tone despite failing to get relief from President Donald Trump’s trade policy.

New Delhi’s response came hours after Trump announced the drastic tariffs that piled more stress on an ailing global economy and sent world stock markets and oil prices tumbling.

While Trump said Indian goods will face a 26% tariff, the White House executive order put the rate at 27%. India’s trade ministry too put the rate at 27%, citing the executive order.

A 10 per cent baseline tariff starts on Saturday before the remaining, higher reciprocal tariff takes effect from April 9.