• Key policy rate: 5.25% (February 2026)
• Q3 2025 GDP growth rate: 8.2% 
• Full-year GDP growth target: 6.5% (fiscal year 2025-2026)
• Manufacturing Purchasing Managers’ Index reading: 56.8 (January 2026)
• Inflation rate: 2.75% (January 2026)

India is currently the world’s most populous nation with over 1.4 billion people. It is also the fastest-growing major economy, according to the World Bank, with real GDP expanding by 6.5 per cent in their fiscal year 2024-2025. 

The services sector is the main driver of the Indian economy, accounting for 54 per cent of national output in the past two years. Financial, real estate, and professional services represent India’s largest business segments, with the country known as a global hub for business process outsourcing and information technology-enabled services. Meanwhile, manufacturing and construction led year-on-year expansions. India’s top exports are mineral fuels and oils; electrical machinery and parts; and precious metals, pearls, and stones. 

In terms of expenditure, private consumption accounts for 56 per cent of GDP, private investments contributed one-third of total output, and a tenth is driven by government spending. The government seeks to boost household spending further with two tax cuts as it targets a growth pace of above 7 per cent yearly.

Strong GDP growth has buoyed investor confidence towards India as yields on 10-year government-issued bonds touched four-year lows in 2025. The Indian bond market received a boost with news of its inclusion in both the JPMorgan and Bloomberg bond indices for emerging markets, expanding the country’s access to global financing. However, the inclusion has been put on hold amid operational concerns towards India’s bond market.

Indian stocks are lagging behind in the absence of homegrown catalysts in the artificial intelligence space. Optimism towards Indian firms have likewise been constrained by the US’ imposition of a 50 per cent tariff on their goods since August 2025, and with Prime Minister Narendra Modi refusing to cave to US President Donald Trump’s demands. The country, however, signed a trade deal with the EU in January 2026, providing a large alternative market for India-made goods.

India struggles to attract greater foreign direct investment (FDIs), with net outflows recorded each year. More Indian entrepreneurs have also chosen to set up unicorn startups outside the South Asian economy than within it, reportedly due to a thick bureaucracy and inconsistent policies governing FDIs. 

House view: India is poised to remain at the frontier of global growth in the coming years especially with China’s economic slowdown. Sustaining this rapid economic expansion would require a substantial increase in foreign investment inflows to support business expansions alongside greater stability in the domestic financial markets. Lundgreen’s remains upbeat on the future of the Indian economy with its abundant skilled labour and large domestic consumer market.

Updated as of 17 February 2026