April: India’s Trade Forecast and AI Strategy – Asia Law Portal

Global financial institutions continue to give India’s economic growth a thumbs-up, though the upward revisions to forecasts are minimal to moderate. Several external factors have been cited, and the government’s commensurate steps have been appreciated. Foreign trade agreements continue to be closed, enabling the expansion of economic activity with additional countries. A sharp focus on creating India’s artificial intelligence (AI) capabilities and policy framework is coming to the fore.

Asian Development Bank – The Asian Development Bank (ADB) recently released its Asian Development Outlook (ADO) April 2026 report titled The Middle East Conflict Challenges Resilience in Asia and the Pacific. As per the report, for India, economic growth is expected to remain strong at 6.9% in FY2026, before strengthening further to 7.3% in FY2027. Economic growth for FY2026 is higher than the projected 6.5% growth in the ADO December 2025, as reported by the Asia Law Portal. Rising consumption and investment will drive growth in FY2026, supported by favourable policies and structural reforms, while a more benign external environment compared to FY2025 will bolster exports. On the supply side, manufacturing and services growth are expected to remain strong, aided by domestic reforms and public spending on rural welfare programmes, price support for key agricultural commodities, and resilient rural incomes. The RBI’s rural and urban consumer confidence surveys show that consumers remain firmly optimistic about the year ahead, buoyed by healthy expectations for general economic conditions, income, and spending. A once-in-a-decade revision of salaries and pensions of central government employees is expected to fuel consumption in FY2027. Inflation is forecast to rise to 4.5% in FY2026 amid conflict in the Middle East, before easing to 4.0% in FY2027 as food prices moderate. A key policy challenge is to rationalise subsidies and transfers to protect vulnerable groups while preserving fiscal space for growth-enhancing public investment.

World Bank – The World Bank recently released its India Development Update. As per this report, despite heightened global trade tensions in FY2026, India remained the fastest-growing major economy, with growth accelerating to 7.6% , up from 7.1% in FY2025. The current account deficit stood at 1% of GDP, and fiscal consolidation continued, bringing the general government deficit to 7.4% of GDP. Employment rates remained stable, and formal job creation strengthened. In FY27, growth is projected at 6.6%, reflecting headwinds from the Middle East conflict. While India’s strong macroeconomic buffers offer some protection against downside risks, the conflict underscores the importance of energy, fiscal, and trade diversification. This is lower than the 7.2% growth projected in the World Bank’s Global Economic Prospects, January 2025 report (reported by Asia Law Portal).

International Monetary Fund – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO) April 2026 report titled Global Economy in the Shadow of War. The report mentions that in India, growth for 2025 is revised upward by 1.0 percentage point relative to October (as reported by the Asia Law Portal), to 7.6%, reflecting the better-than-expected outcome in the second and third quarters of the fiscal year and sustained strong momentum in the fourth quarter. For 2026, growth is revised upward moderately by 0.3 percentage points (0.1 percentage point relative to January, as reported by Asia Law Portal) to 6.5%, led by positive contributions from the carryover of the strong 2025 outturn and the decline in additional US tariffs on Indian goods from 50% to 10%, which outweigh the adverse impact of the Middle East conflict. Growth is projected to stay at 6.5% in 2027.

India-New Zealand FTA – India and New Zealand announced negotiations for a Free Trade Agreement (FTA) on 16 March 2025 and concluded them in a record nine months, making it India’s fastest-concluded free trade agreement to date. The signing of the FTA enhances market access and tariff preferences for Indian exports to New Zealand, while serving as a gateway to the wider Oceania and Pacific Island markets. The agreement opens opportunities for India to emerge as a key supplier of skilled workers, alongside prospects for future cooperation in areas such as AYUSH, and in services including yoga instruction, Indian cuisine, and music tuition, as well as IT, engineering, healthcare, education, and construction.

Special Economic Zone Domestic Sale – In line with the 2026 Budget announcement, conditional customs duty concessions have recently been notified for the clearance of goods manufactured in Special Economic Zones (SEZs) to the Domestic Tariff Area (DTA) to improve capacity utilisation of manufacturing units impacted by global trade disruptions. The measure is expected to benefit approximately 1,200 SEZ manufacturing units by enabling economies of scale, reducing costs, and enhancing resilience, while preserving the export-oriented nature of SEZs. The measure allows eligible SEZ manufacturing units to clear goods to the DTA at concessional duty rates, subject to a limit of 30% of the highest annual free-on-board (FOB) export value achieved in any of the three immediately preceding financial years. Export benefits, such as duty drawback on inputs, are not permitted for such clearances to prevent double benefits. The notification prescribes key eligibility conditions, including a minimum 20% value addition within the SEZ, calculated using a defined formula based on assessable value and input costs. As per Section 30 of the Special Economic Zones Act, 2005, clearance of goods from SEZs to the DTA is treated as imports into India and attracts applicable customs duties, which has affected the competitiveness of SEZ manufacturers. The present measure addresses this concern while ensuring a level playing field for units operating in the DTA.

AI Governance and Economic Group (AIGEG) – The Ministry of Electronics and Information Technology (MeitY), Government of India, has recently constituted the AI Governance and Economic Group (AIGEG), a high-level inter-ministerial body that will serve as India’s central institutional mechanism for AI governance policy development and coordination. The constitution of the AIGEG gives formal effect to institutional recommendations made in India’s AI Governance Guidelines and the Economic Survey. The Guidelines recommend establishing an inter-ministerial body to steer a whole-of-government approach to AI governance, with a view to aligning the actions of ministries, departments, regulators, and advisory bodies around a coherent national strategy. The Economic Survey, in turn, identifies the need for a coordinating authority capable of aligning AI deployment with labour realities and social stability priorities.