The Indian economy has proved resilient
despite US tariffs
Despite much higher-than-expected US import
tariffs, the Indian economy has proved much more resilient than expected, expanding
by 8.2% in year-on-year terms in the July–September quarter, aided by robust
consumer spending growth according
to ACCA’s latest Global Economic Outlook. By comparison, the global economy is
expected to grow at a reasonable but not particularly exciting pace again this
year, supported by easier monetary policy, fiscal stimulus in key economies and
the continued artificial intelligence (AI) boom, but important downside risks
remain in a volatile and unpredictable global environment.
The Indian economy should continue to benefit
from fast growth in consumer spending amid low inflation, cuts in the goods and
services tax, the easing in monetary policy, and strong investment in
infrastructure by the government, while service sector growth is likely to
remain robust, aided in part by exports. Recent policy reforms, including to
the labour market and bankruptcy laws, could help raise the economy’s
performance over coming years. Any trade deal with the US would also be a key
positive for the economy, as would continued low
global oil prices. Developments with domestic food prices is a key risk worth
watching, as always.
Md. Sajid Khan, Director – India at
ACCA, said: ‘It's extremely encouraging to hear that the Indian economy has proved
resilient to the large increase in US import tariffs, benefiting from robust
consumer spending growth. Our report reveals that India is likely to remain the
world’s fastest-growing major economy once again in 2026, and recent reforms
could potentially help improve its longer-term performance.’
The third
edition of ACCA's annual outlook finds that global growth proved stronger than
expected in 2025, despite the major trade disruptions and massive policy
uncertainty. That resilience is likely to carry into 2026, with global GDP
likely to expand by around 3%, broadly in line with last year, though risks
remain more firmly skewed to the downside.
Former IMF
chief economist Ken Rogoff, interviewed for the report, describes the global
economy as ‘solid but not exciting’, while cautioning that the scale of
uncertainty is not fully reflected in financial markets. He warns of the risk
of a significant stock market correction over the next three years, even as
markets could rise further in the interim.
He noted:
“Despite the surprisingly positive economic picture given where it seemed we
were six months ago, I think there are a lot of downsides to the US
administration's policies, with negative consequences for the US economy likely
to emerge in 2027 and 2028. Populist policies work until they don't.”
Jonathan
Ashworth, chief economist at ACCA and author of the report, said: “On a central
case scenario, the global economy should continue with a steady expansion in
2026, aided by looser monetary policy, fiscal easing, and the ongoing AI boom.
The US should be the fastest growing G7 economy, with the administration likely
to double down on efforts to boost growth ahead of the mid-terms. But it is a
fragile global backdrop, amid heightened geopolitical uncertainty, risks of an
escalation in trade tensions, and concerns about threats to the Federal
Reserve’s independence.”
The report identifies three themes that
could be critical in shaping the global economic outlook this year:
·
Developments with AI: Signs that
investment in AI is beginning to boost productivity at firms, could allay fears
about an AI bubble like the dot-com bubble. Alternatively, if
doubts about its productivity-enhancing effects were to build, the risk of a
market correction could increase.
·
Developments in advanced economy bond
markets: A large rise in government bond yields would weigh on
economies and raise debt-servicing costs. Catalysts include investor concerns
about debt sustainability and threats to the Federal Reserve’s independence,
political instability, and monetary tightening in Japan.
·
Developments with global trade: The ongoing
ripple effects from the large rise in US tariffs need to be monitored closely,
and risks remain of a reescalation in trade tensions.
Business leaders also provided insights on their countries and/or regions, with key issues in 2026 including AI, geopolitics, trade, the green transition and cybersecurity.
Ashworth added: “In a volatile, unpredictable and rapidly changing world, understanding the interplay of economic, geopolitical, political, and technological factors will be critical for businesses and policymakers.”
The 2026
Global Economic Outlook provides detailed analysis of global prospects and
strategic insights for finance leaders navigating an uncertain global
environment. Download the full report here.