India’s Economy in 2026: A Mixed Bag
India is heading into 2026 with some impressive economic indicators, including strong growth, low inflation, and political stability. However, beneath these positive numbers lies a growing disconnect between the country’s macroeconomic performance and the everyday economic reality of its citizens.
Growth and Inflation
The Indian economy surprised many by growing 8.2% in the July-September quarter of 2025, prompting the Reserve Bank of India to raise its growth forecast for 2026 to 6.8%. Inflation has also remained low, giving the central bank room to consider further interest rate cuts. However, this growth is not being felt evenly across the population, with the affluent capturing a disproportionate share of the gains.
Uneven Growth
The property market is a prime example of this imbalance. Luxury apartments priced above $1 million are selling quickly, while middle-income housing projects are struggling to find buyers. This disparity is reflected in other areas of the economy, with value rising but volumes remaining stagnant.
Pressures on Household Wellbeing
There are two major structural pressures weighing on household wellbeing in India: employment and household debt. Official data shows unemployment falling to 4.7% in November 2025, but this number does not tell the whole story. Many job seekers are being absorbed into gig work, which often lacks stability, safety nets, or opportunities for advancement. Meanwhile, part of the rise in employment figures can be attributed to definitional changes that now count unpaid helpers in family enterprises as employed.
Household Debt
Household debt is another major concern, with liabilities exceeding 41% of GDP as of March 2025. Nearly half of borrowing is directed towards consumption rather than asset creation, and slower wage growth, job insecurity, and a savings rate still below pre-pandemic levels are forcing many households to borrow just to maintain their living standards.
Equity Markets
India’s equity markets are also reflecting the broader economy’s imbalance. Benchmark indices touched new highs in 2025, but gains were concentrated in a narrow group of stocks. Small and mid-cap shares struggled, with nearly half delivering negative returns and most others trading in a tight range. For many retail investors, portfolios failed to reflect the headline index performance.
Outlook for 2026
The outlook for 2026 is cautiously optimistic, but hinges on corporate earnings and liquidity conditions. A potential US Federal Reserve rate cut could improve global risk appetite, but the link between lower US rates and foreign inflows into India has weakened. Domestically focused companies will depend on a revival in private-sector capital expenditure and consumption.
Political Stability
Politically, Prime Minister Narendra Modi’s government enters 2026 from a position of relative comfort. State elections in Assam, Kerala, Tamil Nadu, and West Bengal are not seen as decisive for the ruling Bharatiya Janata Party at the national level. However, the government is facing greater scrutiny, and criticism has become more audible in mainstream media and on social platforms.
Emerging Frictions
The opposition remains fragmented and has struggled in recent state elections, leaving Modi’s main challenges internal rather than external. Questions around succession ahead of the 2029 general election linger, even as his electoral base remains stable. For 2026, the key issue is how effectively the government uses political stability to address economic stress without triggering backlash.
Conclusion
In conclusion, India’s economy in 2026 is a mixed bag. While the country’s macroeconomic indicators are positive, the benefits of growth are not being felt evenly across the population. The government must use its political stability to address the pressing issues of employment, household debt, and uneven growth. The policy choices made now will likely shape the narrative heading into the next national election cycle. As India looks to the future, it must find a way to ensure that its economic growth translates into broader income and employment gains, and that the benefits of growth are shared by all.
