India’s Outlook for 2026: Navigating Transformation in a Defining Year

This article is authored by N.K Minda, Chairman, Uno Minda.The global economic landscape has undergone a fundamental shift over the past few years. The world order shaped by two to three decades of deep globalization—characterized by free trade, integrated supply chains and global sourcing—has given way to a more fragmented and protectionist environment. Escalating geopolitical tensions, regional conflicts and strategic competition have compelled large economies to impose tariffs, non-tariff barriers and export controls, particularly on critical raw materials such as semiconductors, rare earths, energy inputs and advanced technologies. These developments have disrupted global supply chains, raised costs and increased volatility for businesses worldwide.The impact is visible in global growth numbers. According to multilateral estimates, world GDP growth has moderated to around 3%, significantly lower than the average 3.8–4% witnessed in the pre-2010 decade. Advanced economies are growing at a much slower pace—around 1–1.5%. Against this challenging global backdrop, India’s economic performance has been notably resilient. India has emerged as the fastest-growing major economy, with an estimated 7%+ growth in FY26, despite global headwinds. Strong domestic consumption, sustained government capital expenditure—now exceeding ₹11 trillion and over 3.4% of GDP—and structural reforms have supported this momentum. India today contributes nearly 16% of global growth, underscoring its increasing importance in the world economy.However, while India has done well, we must acknowledge that our ambition must be higher. To achieve long-term sustained growth comparable to China’s high-growth decade between 2003 and 2013, when it consistently grew at 9–11% annually for over a decade, India needs to accelerate manufacturing, deepen industrial capabilities and significantly expand its share in global value chains. Manufacturing currently contributes about 17–18% of India’s GDP, compared to 25–30% during China’s peak growth years. This gap highlights the urgency of localisation, Atmanirbhar Bharat and the creation of resilient domestic supply chains. Building local ecosystems for critical components, electronics, energy systems and advanced materials is the most effective response to global volatility.The automotive sector exemplifies India’s growth potential when policy alignment and market demand converge. Measures such as personal income tax rationalisation, GST corrections and a relatively supportive interest rate environment have boosted consumer sentiment. As a result, India has emerged as the third-largest automobile market globally, with annual vehicle sales exceeding 25 million units.Yet, India’s automotive opportunity is still at a very early stage when viewed structurally. India’s car ownership stands at just around 44 cars per 1,000 people, compared to 300+ cars per 1,000 in developed economies and even 150–200 in several emerging markets. This stark gap highlights the enormous headroom for long-term growth as incomes rise, urbanization accelerates and mobility aspirations expand. It is this structural under-penetration that gives confidence in sustained demand growth for the automotive sector over the next decade and beyond.At the same time, the nature of the auto industry itself is undergoing a fundamental transformation. Consumers today demand advanced safety, digital interfaces, connectivity and technology-rich features. Electronics now account for 35–40% of vehicle value, up from less than 20% a decade ago. ADAS, connected platforms, advanced lighting, power electronics and software-defined architectures are becoming mainstream. The EV transition is further accelerating this shift, with EV penetration expected to rise from 6–7% today to 15–20% by 2030 across segments.Looking ahead, the growth momentum in the automotive sector is expected to continue into the next financial year and beyond. After decades, we are witnessing a phase where almost all major OEMs are expanding capacities. Investments in EVs, new platforms and advanced technologies will remain strong drivers of growth and localisation.Another critical dimension of India’s future competitiveness is artificial intelligence. While India has strong digital talent and a vibrant startup ecosystem, we currently lag behind the US and China, both of which are investing tens of billions of dollars annually in AI infrastructure, foundational models and compute capacity. AI will be a decisive force multiplier across manufacturing, mobility, logistics, healthcare and governance. India must move faster to build AI capabilities—through investments in compute infrastructure, data ecosystems, skilling and industry-led use cases. Catching up is not optional; it is essential to sustaining productivity-led growth.I remain optimistic about India’s growth trajectory through FY27 and beyond. Government policy will continue to be a critical enabler. In the upcoming Union Budget, continued focus on infrastructure, manufacturing incentives, R&D support, EV ecosystem development, MSME integration and technology-led skilling can significantly enhance India’s competitiveness. A sharper policy thrust on AI adoption and domestic capability creation will further future-proof the economy.India’s next phase of development will rest on five core reform pillars: accelerating manufacturing and industrial competitiveness for Make In India; supporting MSME Growth, enabling technology- and AI-led innovation; strengthening infrastructure and logistics; advancing sustainability and the energy transition; and deepening ease of doing business through regulatory reforms. Together, these pillars provide a comprehensive framework for building a resilient and future-ready economy.The world may be fragmenting, but this moment presents India with a historic opportunity. With the right mix of policy, industry action and technological ambition, India can emerge not only as a fast-growing economy, but as a globally competitive, innovation-driven economic powerhouse.Disclaimer: Views and opinions expressed in this article are solely those of the original author and do not represent any of The Times Group or its employees.