New Delhi: India’s economy is projected to maintain steady growth in the second half of the current financial year, underpinned by robust domestic consumption, according to a report by SBI Capital Markets (SBICAPS). Despite ongoing global trade tensions and external risks, internal demand continues to act as a stabilising factor for the economy.
The report noted that the recent imposition of steep 50 per cent tariffs by the United States on Indian goods has prompted policymakers to focus more on domestic growth levers. Both the Union and state governments have increased capital expenditure during the year-to-date FY26 period, a move expected to boost gross fixed capital formation.
“The government has timed recent GST rate changes to coincide with the festive season, reflecting the importance of sustaining domestic consumption,” the report stated. Early indicators suggest a strong festive season, with the Confederation of All India Traders (CAIT) estimating sales could reach a record Rs 4.75 trillion this year. Auto retail sales during the Navaratri period have already shown year-on-year growth, signalling rising consumer demand.
On the global front, SBICAPS described tariffs as the “new abnormal,” highlighting unpredictability in international trade. While Chinese exports to the US fell 33 per cent in August 2025 compared to the previous year, overall shipments rose 4.4 per cent, suggesting a rerouting of supply chains rather than a full-scale disruption. Essential sectors such as electronics and generic drugs have so far been spared US duties, though consumers are beginning to feel inflationary pressures.
The report also highlighted a shift in global monetary trends, with central banks holding more gold than US treasuries for the first time in three decades. While no clear alternative to the US dollar has emerged, interest in the Chinese yuan and digital currencies is growing as nations explore new monetary anchors.
Domestically, the Reserve Bank of India has introduced measures to support credit flow, including the removal of sectoral caps on large borrowers, easing restrictions on acquisition finance, and raising lending limits for loans against shares, REITs, and InvITs. These measures, along with a phased rollout of new capital norms, have lifted the credit-deposit ratio above 80 per cent in FY26.
Despite $18 billion being withdrawn by foreign portfolio investors from Indian equities in 2025, domestic investors continue to show strong confidence in the country’s growth story. SBICAPS also flagged potential risks in speculative sectors like artificial intelligence, noting that high valuations, such as OpenAI’s $500 billion estimate, may not yet translate into reliable monetisation.