India’s economic resilience will increasingly depend on the successful implementation of free trade agreements (FTAs) and complementary industrial reforms as geopolitical tensions, trade disruptions and inflationary pressures reshape the global economy, according to Deloitte’s latest India Economic Outlook.
Deloitte expects India’s economy to grow 6.5-6.8 per cent in FY26-27 as geopolitical tension and global trade uncertainties weigh on the outlook.
The consultancy said free trade agreements with key partners, supported by industrial reforms, domestic value addition and stronger supply chains, will be critical to sustaining long-term growth, boosting exports and reducing dependence.
The report projects India’s gross domestic product (GDP) growth at 6.5-6.8 per cent in FY2026-27, lower than the strong momentum seen in the previous fiscal, as rising external risks weigh on economic activity. While India entered 2026 from a position of macroeconomic strength, Deloitte said prolonged geopolitical uncertainty, particularly in the Middle East, has exposed structural vulnerabilities that could influence inflation, trade and investment flows, it said in an article from Dr. Rumki Majumdar and Debdatta Ghatak.
The firm stated that India’s economic outlook has become considerably more uncertain following geopolitical developments and disruptions to global trade routes.
The outlook identifies seven key risks facing the economy, including capital-flow volatility, currency depreciation, inflationary pressures, fiscal constraints, delays in the proposed India-US trade agreement, elevated global interest rates and the Reserve Bank of India’s (RBI) policy trade-offs.
Foreign portfolio investment outflows reached approximately $18 billion during FY2025-26 and accelerated to $21.6 billion during March-April 2026 amid global uncertainty. Meanwhile, the Indian rupee weakened nearly 10 per cent against the US dollar during the previous fiscal before recovering partially to above ₹94 per dollar.
Inflation is expected to rise to 5.5 per cent in FY2026-27, driven by higher crude oil prices, imported input costs, currency weakness and possible weather-related food inflation linked to El Nino, before easing to 4.2 per cent in the following fiscal.
Despite higher subsidy spending and lower customs revenue affecting public finances, the consultancy firm expects government capital expenditure to remain largely intact.
The report expects economic growth to remain moderate during the first half of FY2026-27 before strengthening during the October-December festive season as domestic demand improves and geopolitical uncertainties gradually ease.
India’s expanding network of FTAs will play a significantly larger role in sustaining long-term economic resilience than simply improving export access, as per the outlook.
India has signed 22 FTAs, including eight over the past six years, reflecting a more strategic trade policy aimed at diversifying export markets, strengthening supply-chain resilience and securing access to critical imports.
The report noted that agreements with the United Arab Emirates, Mauritius and Australia have already improved India’s market presence, while recently concluded or ongoing negotiations with the United Kingdom, the United States and the European Union could create new opportunities across electronics, engineering goods, pharmaceuticals, chemicals, textiles and auto components.
Deloitte said modern FTAs should also be viewed as instruments for strengthening manufacturing competitiveness by ensuring diversified access to intermediate inputs required by sectors such as electronics, machinery and chemicals.
The consultancy cautioned that trade agreements alone will not be sufficient to strengthen India’s long-term competitiveness.
It said industrial policies, including production-linked incentive schemes, infrastructure development and domestic capability building, must complement FTAs by increasing local value addition and gradually reducing dependence on imported intermediate goods.
At the same time, improving the ease of doing business, simplifying compliance procedures, increasing awareness of FTA provisions and strengthening logistics infrastructure will be essential to maximise the benefits of India’s expanding trade network.
Deloitte concluded that India’s preferential trade access across 38 countries provides an opportunity to deepen integration with global value chains, provided trade liberalisation is supported by sustained industrial reforms and effective implementation.
Fibre2Fashion News Desk (SG)
