India is set to experience the highest economic growth among the G20 nations in FY26, with a projected growth rate of 6.5%, according to Moody’s Ratings. This growth is expected to outpace both advanced and emerging economies. Moody’s had previously forecasted 6.7% growth for the last fiscal year.

The country’s growth is expected to be driven by key factors, including tax measures and continued monetary easing. India’s economy will also benefit from its ability to attract foreign investment, even in the face of global economic uncertainties.

Inflation in India is projected to average 4.5% in FY26, slightly down from 4.9% in the previous fiscal year. This moderate inflation outlook reflects the country’s ongoing economic stability.

Moody’s also noted that while emerging markets face challenges from shifting U.S. policies and global economic turbulence, India is well-equipped to handle such external pressures. The country’s large, domestically oriented economy and deep financial markets provide a strong buffer against potential capital outflows and financial shocks.

India’s economic resilience is bolstered by its low external vulnerability indicator of 61%, which highlights its reduced susceptibility to global financial disruptions. Additionally, India’s higher proportion of domestic currency-denominated external debt helps shield it from exchange rate risks, making it more insulated from external financial shocks.

Moody’s emphasized that India and other large emerging markets like Brazil are better positioned to attract and retain global capital. Their large, domestically driven economies, combined with strong foreign exchange reserves, offer a sense of stability and confidence to international investors, even in risk-averse condition

While India’s growth remains strong, global growth in emerging markets is expected to slow down slightly in FY26, although growth in Asia-Pacific remains robust. However, the region’s integration into global trade means it is more exposed to risks from U.S. tariffs and changing trade dynamics, which could dampen growth.

India’s positive outlook for FY26 highlights its ability to remain resilient in an uncertain global environment, making it a prime location for investment and continued economic growth.