WHAT YOU NEED TO KNOW
  • India continues to experience policy continuity and a stable political environment despite upcoming state elections in investment-friendly states such as Tamil Nadu and Assam as well as others, including Kerala, West Bengal and Puducherry.
  • The International Monetary Fund (IMF) has labeled India a “key growth engine” and raised the country’s GDP growth forecast to 6.6 percent for 2025 — the highest among both advanced and emerging economies.
  • India’s external position remains relatively stable, with a moderate current account deficit and strong foreign exchange reserves. Goods exports rose 7 percent in September despite a decline in U.S. exports. Electronics became the third-largest export category in fiscal year 2025.
  • The India-U.S. trade agreement remains key to enhancing investor confidence and opening new avenues for cross-border business expansion.
  • India’s investment environment is expected to remain stable and reform-driven, with strong infrastructure spending, digital sector growth, labor reforms and targeted supply chain policies.
ON THE HORIZON
  • While national-level governance under the Bharatiya Janata Party (BJP)-led coalition remains steady, regional political shifts may influence local policy frameworks and investment priorities. Businesses should monitor developments in key states — particularly Assam and Tamil Nadu — for potential policy announcements and sectoral incentives.
  • Upcoming trade agreements with the United States and European Union will improve investor confidence and expand market access, with the U.S. trade agreement likely to be signed before December.
  • Union Budget 2026-2027, to be announced in February 2026, will be watched closely for policy directions, especially reforms for labor-intensive and export-oriented sectors to build resilience against global headwinds.
  • Key structural reforms will continue on tax system overhaul, supply chain realignment and manufacturing incentives, artificial intelligence (AI) and the digital economy.
  • India is expected to host more than 200 pre-summit events ahead of the Impact AI Summit scheduled in New Delhi in February 2026, opening up opportunities for private sector dialogue.

India Market Overview and Forecast


Political Climate
Stable Policy Outlook To Continue Amid Upcoming State Elections

On the back of a historic victory in Bihar, the BJP under Prime Minister Narendra Modi will look to consolidate its predominant position in India’s political landscape in the upcoming state elections across Assam, Kerala, Tamil Nadu, West Bengal and Puducherry. These states represent diverse economic profiles — from manufacturing and information technology hubs to agrarian economies with strategic regional significance. The election outcomes will influence policy directions, regional investment climates and sectoral priorities at the federal and state level. Short-term policy shifts driven by electoral promises — such as subsidies, tax relief and welfare schemes — may impact overall industrial incentives for businesses.

Of the states holding elections in mid-2026, Assam is BJP’s stronghold in the northeast. Multiple mega investments in the energy, semiconductor, electronics and food and agricultural sectors have been pledged in the state this year. In contrast, the BJP seeks to make inroads into Tamil Nadu, which is typically a battleground for regional parties but is a manufacturing and technology — especially data center — powerhouse. Businesses should monitor potential announcements related to industrial policy and incentive frameworks in these states. Kerala and West Bengal are politically charged states, historically dominated by regional parties. The BJP will continue to build support in these states, with the expectation of an electoral win in West Bengal.

At the national level, the BJP-led National Democratic Alliance continues to govern with coalition support, maintaining policy continuity but exercising caution on sweeping reforms. Businesses can expect a stable macroeconomic environment, driven by infrastructure spending, digital expansion and job creation. However, political shifts in key states may lead to changes in local policy and public spending.

Macroeconomic Climate
Resilient Growth Amid Global Uncertainties

With an 8.2 percent GDP growth in the second quarter of the financial year, India’s economy is showing resilience despite ongoing global uncertainties. The IMF has raised the country’s GDP growth forecast to 6.6 percent, the highest among advanced and emerging economies. It has also labeled India a “key growth engine,” underscoring its essential role in supporting global economic momentum. The Reserve Bank projects stronger growth of 6.8 percent, driven by robust expansion in the services sector, followed by manufacturing.

Bolstering this positive outlook, S&P Global Ratings recently upgraded India’s long-term sovereign credit rating from BBB- to BBB for the first time in 18 years. On the policy front, the Goods and Services Tax Council has simplified the indirect tax structure, a move expected to enhance consumption and investment in the long term despite short-term fiscal costs. Income tax relief and lower debt servicing costs from rate cuts are also projected to boost GDP by 0.6 percent over the next four to six quarters.

Inflation remains subdued, with retail inflation falling to a historic low of 0.25 percent in October — well below the Reserve Bank’s target range. Above-average rainfall could benefit the agricultural sector, supporting rural demand. Urban consumption is expected to rise with ongoing tax reforms and lower inflation.

While India’s external position remains relatively stable, external risks persist. Sustained U.S. tariffs of 50 percent on goods worth $48 billion will impact exports in sectors like textiles, gems and jewelry and machinery. India’s overall goods exports declined by 11.8 percent year on year in October, mainly due to a high-base effect and weak global demand, with exports to the United States falling by 8.5 percent year on year. Trade talks with Washington are ongoing, raising hopes for a deal by December.

To mitigate these risks, India is diversifying its export markets, securing a free trade agreement with the United Kingdom and activating its deal with the European Free Trade Association. India is also in negotiations with the European Union, Qatar, Peru, Chile and New Zealand.

Investment Environment
India’s Investment Push Spans From Ports and Power to Production and Platforms

India’s investment climate is expected to remain growth-oriented, underpinned by strong government-led infrastructure expansion, labor- and manufacturing-related reforms and targeted sectoral incentives. The PM Gati Shakti roadmap and the National Logistics Policy will continue to fast-track new deep-sea ports, dedicated freight corridors, undersea cables and inland ports — offering multiple access points for technology, logistics and manufacturing companies.

More states will unveil updated data center policies, renewable power incentives and land allotments aimed at attracting hyperscalers and cloud providers, signaling a favorable push for digital infrastructure investment. New programs under the India AI Mission and India Semiconductor Mission will offer businesses new opportunities, leveraging India’s large and aspiring consumer base. Besides the five semiconductor plants already approved, India has permitted seven additional projects under the recently announced Electronics Manufacturing Component Scheme — a trend that will continue over the next few years.

The latest reform to consolidate labor laws into four codes will formalize India’s workforce, simplify compliance and help attract investment. India Stack — the country’s digital public infrastructure — is also evolving with plans for an integrated Labor and Employment Stack offering a scalable, technology-enabled framework for intelligent job matching, credential authentication and skill alignment. These initiatives, coupled with Pradhan Mantri Viksit Bharat Rojgar Yojana and a renewed PM Internship Scheme, are expected to reinforce cooperative federalism, digital governance and transparency.

Notification of the Digital Personal Data Protections Rules will add predictability to regulatory framework for data protection and cross-border services delivery. Information technology businesses and global capability centers should expect streamlined approvals and state-level incentives. In addition, the government’s supply chain realignment agenda, via extended production-linked incentive schemes, logistics corridor initiatives and tariff rationalization, could drive relocation of manufacturing into India.

India will continue to ramp up clean energy deployment, having exceeded conventional energy generation. With around 23 gigawatts (GW) of new added renewable capacity in the first five months of fiscal year, the government is signaling that another 20-25 GW could be commissioned within the next half year. Businesses focused on solar and wind-hybrid development, battery-storage, data-center co-location and local manufacturing may benefit from strong policy tailwinds.

We will continue to keep you updated on developments in India as they occur. If you have any questions or comments, please contact BGA India Managing Director Anuj Gupta at agupta@bowergroupasia.com.

Best regards,

BGA India Team

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Managing Director

Anuj is a distinguished policy leader and strategist who has played a catalytic role across India’s government and private sector, guiding stakeholders through the country’s complex and evolving policy and investment landscape. As BGA’s India practice leader, he helps clients leverage the country’s rapid economic growth to advance their goals and strategies.  Anuj previously led public policy efforts for the Tata Group, India’s largest business conglomerate, where he advised more than 30 group companies on policy affairs strategy. His interventions directly influenced high-stakes outcomes across diverse sectors, including technology, finance and manufacturing.   Anuj spent a decade in the Indian and Abu Dhabi governments, where he ... Read More