New Delhi, Aug 27: India’s economy is entering the second half of 2026 on a relatively firm footing, with strong domestic demand, improving manufacturing and services activity and a recovery in foreign investment providing support despite a challenging global environment.
The latest assessment of economic conditions points to continued resilience in domestic activity. The Reserve Bank of India has highlighted buoyant consumer demand and steady activity across manufacturing and services as key strengths for the economy.
Foreign investment has also shown signs of improvement. Net foreign direct investment rose to $1.3 billion in June, compared with an outflow of $0.1 billion in May. During the April-June quarter, net FDI reached $7.8 billion, up from $4.8 billion a year earlier. Manufacturing attracted the largest share of equity inflows, followed by electricity generation and computer and communication services.
The monsoon has provided some relief to the agricultural sector after a weak start to the season. Improved rainfall in July helped kharif sowing move closer to normal levels, easing some of the immediate pressure on farm activity and rural demand.
India’s financial markets are also seeing renewed interest from overseas investors. Foreign portfolio investors have increased buying in sectors including financial services, automobiles and information technology, although market sentiment remains sensitive to global developments.
At the same time, the outlook remains cautious. Below-normal and uneven rainfall, elevated crude oil prices, geopolitical tensions and uncertainty over global trade could affect inflation, rural incomes and business investment in the coming months. ICRA has also flagged deficient rainfall and rising inflation as near-term risks to economic activity.
India’s growth momentum is expected to moderate from the strong pace recorded in the previous quarter. A recent Reuters poll estimated year-on-year growth at 7.1 per cent for April-June 2026, compared with 7.8 per cent in the previous quarter.
Despite these challenges, the broader picture remains one of resilience. Strong consumer demand, investment activity, improving capital inflows and the continued expansion of services are providing important support to the economy.
For businesses, the coming months will be important as they balance domestic opportunities with higher global risks and changing costs. For investors, the focus is likely to remain on corporate earnings, economic fundamentals and sectors that can maintain growth in a more uncertain global environment.
India’s economic story in the second half of 2026 is therefore less about uninterrupted growth and more about how effectively the country can sustain domestic momentum while managing global and weather-related risks.