New Delhi [India], December 22 : India is expected to remain one of the fastest-growing major economies in 2026, supported by strong policy measures, favourable demographics and rapid digitalisation, even as growth moderates toward long-term trends, according to the Mastercard Economics Institute (MEI).
MEI forecasts India's real GDP growth at 6.6 per cent in 2026, easing from the robust 7.8 per cent recorded in 2025. Inflation is projected to rise to 4.2 per cent in 2026 from 2.2 per cent in the previous year, reflecting a normalisation from exceptionally low price pressures.
Despite this moderation, India's growth outlook remains resilient, underpinned by domestic policy support and structural strengths.
The report notes that front-loaded monetary easing, income tax reforms and the rationalisation of goods and services tax (GST) rates are expected to bolster personal consumption.
In addition, targeted export support measures could help mitigate downside risks arising from a challenging global environment.
Disinflationary impulses from lower commodity prices and global goods prices are also likely to support India's growth resilience.
Structural drivers continue to play a critical role. Digitisation, technological advancement and favourable demographics are positioning India as a key engine of growth among large economies.
These factors are also enabling the expansion of global capability centres and strengthening economic activity in Tier 2 and Tier 3 cities, contributing to a broader-based growth model.
However, MEI highlights persistent external headwinds. High tariffs imposed by the United States may weigh on labour-intensive sectors such as textiles, gems and jewellery. Tightening immigration norms could also affect India's IT services sector through reduced labour mobility, travel flows and remittances.
Progress on the ongoing US-India trade deal will be closely watched, as these developments could influence India's external demand outlook. At the same time, these challenges may accelerate India's efforts to diversify supply chains and expand goods trade through bilateral and regional agreements.
Beyond India, the broader South Asian region is expected to see uneven but improving growth dynamics. Sri Lanka's economy is projected to grow by 3.7 per cent in 2026, moderating from 4.4 per cent in 2025.
Despite the slowdown, underlying momentum remains robust, supported by private consumption, investment, low inflation, strong remittance inflows, rising tourism receipts and accommodative monetary policy, the report said.
Bangladesh is expected to grow at 5 per cent in 2026, aided by easing inflation and remittance inflows. However, MEI cautioned that structural challenges and policy uncertainty continue to pose risks to the country's economic recovery.
MEI warned that global supply chain disruptions, external market instability and climate-related volatility, particularly in food prices, remain key downside risks for South Asia's outlook. Nonetheless, the combination of policy support, demographic advantages and tourism-led expansion is expected to sustain growth momentum across the region in 2026.
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