Deloitte India now expects India's economy to grow between 6.7% and 6.9% in the current fiscal year, FY26, with an average growth of 6.8%. This updated projection reflects a 0.3 percentage point increase from Deloitte’s earlier forecast for the year. The consultancy firm attributes this optimistic outlook to robust domestic demand and ongoing policy reforms by the government. T^[1][2][3][4]he Reserve Bank of India (RBI) also projects a 6.8% economic growth for India in FY26, aligning with Deloitte's assessment. ^[5][3][4]### Strong Domestic Consumption Fuels Growth India's economic performance in the first quarter of FY26 (April to June) was strong, with a 7.8% growth rate. This figure surpassed market expectations and demonstrated the economy's resilience. S^[1][2][6]trong domestic demand remains the primary engine driving this growth. Increased consumer spending, especially during the festive quarter, is a key factor. I^[5][7][4]mproved purchasing power, supported by stable inflation, helps boost consumption. ^[5][1][3]Deloitte India Economist Rumki Majumdar noted that demand during the festive quarter will likely see a significant rise in consumption spending. She added that this surge is expected to lead to robust private investment. Businesses are preparing to meet the anticipated increase in consumer spending. A^[5][2][7] strong rural consumer confidence index, currently above 100, also indicates optimism in rural demand. Improved crop output is set to support farm incomes in the coming months. ^[7][6]Government policy reforms also play a crucial role in the positive forecast. Accommodative monetary policy and structural measures, such as the proposed GST 2.0, are contributing to the favorable economic environment. T^[1][3][4]hese reforms are helping to reinforce medium-term growth prospects for the nation. ^[2]### Global Uncertainties Pose Potential Risks Despite the strong domestic indicators, Deloitte India's report highlights several potential risks. Global headwinds could still affect India's growth trajectory. I^[8][7]ncreased trade tensions and geopolitical uncertainties are major concerns. T^[5][9]hese factors could lead to a rapid decline in exports. S^[10]upply chain disruptions resulting from geopolitical events may also impact costs and production within India. ^[10]Deloitte also points to the limited supply of vital minerals as a potential challenge. H^[5]igher inflation in Western economies could increase inflationary pressures within India. P^[8][10]ersistent core inflation, which excludes volatile food and fuel prices, remains a concern. If it stays high, it could limit the RBI’s ability to cut interest rates. Fur^[2][11]thermore, if the US Federal Reserve maintains high policy rates, it could tighten global liquidity. This scenario might accelerate capital outflows from emerging markets like India. Ho^[11][10]wever, the report also suggests potential positive international developments. There is anticipation that India may finalize trade deals with the United States and the European Union by the end of the year. Such agreements are expected to boost overall investor sentiment. ##^[5][3][4]# Strengthening MSMEs Critical for Sustainable Growth Deloitte emphasizes that India's economy remains robust and continues to strengthen despite global uncertainties. The country is emerging stronger than most nations. The^[1][3][6] report underscores the critical importance of supporting the Micro, Small, and Medium Enterprises (MSME) sector. The^[5][4]se small businesses are vital for creating jobs, boosting exports, and increasing income across the country. St^[5][12]rengthening MSMEs is crucial for maintaining India's steady economic growth in the medium term. Whi^[5]le previous policy efforts have focused on domestic consumption, the report suggests a greater emphasis on empowering the MSME sector. This strategic focus will help ensure broad-based economic development. Ind^[11]ia’s growth story will be driven by a combination of strong domestic fundamentals and expanding global opportunities. Indi^[9]a's updated GDP forecast reflects confidence in its domestic economy and ongoing reforms. However, the nation must carefully navigate global trade complexities and support its vital small business sector to sustain this momentum. ^[9][12][11]