India’s economic prospects for 2025-26 could pleasantly surprise many analysts, with Moody’s Christian de Guzman highlighting factors that could drive growth beyond current expectations. Moody’s has forecasted India’s GDP growth around 6.5 percent for that fiscal year, but de Guzman suggests there’s upside potential if certain conditions align favorably.

Key to this optimistic outlook is a revival in exports coupled with sustained low inflation. These two factors combined could accelerate India’s economic expansion beyond the baseline projections. Let’s unpack why these aspects matter so much and how they could reshape the Indian economic landscape in the coming years.

Firstly, exports have been an area of concern for India amid a backdrop of global economic uncertainties. Trade tensions, fluctuating commodity prices, and subdued demand in key markets have weighed on India’s export performance. However, if global trade dynamics ease—such as a reduction in tariff tensions with major partners like the US—India could see a meaningful boost in its export volumes. This recovery would directly feed into GDP growth, as exports are a critical source of foreign exchange and economic vitality.

Christian de Guzman points out that easing trade restrictions and more favorable global trade conditions could unlock this export potential. It’s an important reminder that India’s growth is not insulated from global influences, and improvements on this front will be a big catalyst for better-than-expected growth.

Secondly, inflation control remains central to sustaining this positive trajectory. Keeping inflation low and stable helps maintain purchasing power for consumers while ensuring the cost of borrowing stays manageable for businesses. Moody’s notes that India’s ability to keep inflation in check will be instrumental in supporting robust private sector investment and consumption.

Why does this matter? Inflation impacts interest rates, which in turn influence investment decisions and consumer confidence. If inflation remains subdued, the Reserve Bank of India (RBI) may continue with accommodative monetary policies that encourage borrowing and spending—both crucial for fueling economic growth.

Another dimension to watch is private sector investment. De Guzman highlighted how supportive monetary conditions and stable inflation can boost business confidence, leading to more investments in infrastructure, manufacturing, technology, and other growth-driving sectors. This investment is vital for creating jobs, enhancing productivity, and sustaining long-term growth.

However, challenges remain. Political developments and policy reforms will also play a significant role in shaping India’s economic future. For instance, revenue reforms might hit roadblocks amid the election cycle, potentially constraining government finances and expenditure. Nevertheless, Moody’s outlook suggests that if exports rebound and inflation remains controlled, the private sector’s resilience could offset some of these challenges.

In summary, India’s economy in 2025-26 could outperform Moody’s already optimistic forecast if exports rebound and inflation remains manageable. Investors and market watchers should keep an eye on global trade relations and domestic inflation metrics as early indicators of a potential growth surprise. This nuanced outlook underscores India’s interconnectedness with global trends while highlighting the domestic factors crucial for sustained economic momentum.

For anyone tracking India’s growth story, these insights from Moody’s Christian de Guzman offer a balanced mix of caution and optimism. The next couple of years hold the promise of accelerated growth if the right economic conditions solidify, making it an exciting period for investors, businesses, and policymakers alike.