House View: Elevated uncertainty, improving India fundamentals

India’s macro setup looks incrementally better heading into CY26, supported by improving policy transmission and targeted demand support. With inflation remaining under control, the focus has shifted toward supporting growth through easier financial conditions, as past rate cuts begin to lower borrowing costs and support credit growth. On the fiscal side, recent measures are expected to provide a meaningful boost to consumption, with an estimated ~INR 2.6 tn stimulus largely aimed at supporting urban demand, alongside improving rural trends.

Highlights

• The global investment landscape continues to be shaped by elevated geopolitical uncertainty and shifting political dynamics. Ongoing global conflicts have moved to the forefront, underscoring persistent geopolitical tensions.
• In the United States, renewed concerns around a government shutdown resurfaced during the quarter, underscoring persistent fiscal and political frictions.  
• A prolonged delay in finalising the India–US trade agreement could weigh on sentiment and foreign capital flows, particularly in an environment of heightened global uncertainty. As a result, while the medium-term growth outlook remains constructive, the near-term trajectory is likely to be shaped by fiscal execution, state-level finances, and external policy developments.
• On the fiscal front, slowing revenue growth could constrain the government’s ability to sustain elevated capital expenditure, especially if consumption-led tax buoyancy underperforms expectations