It can sometimes be useful to evaluate an economy not just by how fast it grows, but by how much of shocks it can take in without derailing. Seen through that test, India’s performance over the past year makes for interesting reading in terms of assessing its resilience.
GDP expanded 7.8 percent year-on-year in the first quarter FY27. Industrial output recorded year-on-year growth in 12 months from October 2025 to September 2026, while cumulative production grew 6.8 percent in April–September FY27. For the fiscal year to date, April–October 2026 gross Goods and Services Tax (GST) collections reached Rs 14.78 lakh crore, up 13.2 percent year-on-year; net collections rose 12.6 percent to Rs 12.69 lakh crore. The real-economy indicators point to domestic demand holding up against the external drag.
The stock market, although a less stable marker, can serve as a useful proxy to gauge the broader sentiment. Across the completed Samvat 2082, the Nifty fell 3.1 per cent, while the Midcap 100 and Smallcap 100 gained 2.1 percent and 4.2 percent.
The important story is not that India escaped the turbulence. It did not. The story is that external shocks did not overwhelm domestic economic activity. Fiscal discipline continued public investment, foreign exchange buffers and a deeper pool of domestic savings helped contain the damage. That is a more consequential achievement than the direction of the stock market on a single trading day.
When the global tide turned
Last Diwali, the outlook appeared relatively benign. The Sensex was at 84,400, less than 2 percent below its record. Lower domestic interest rates and expectations of an earnings recovery supported sentiment, while investors hoped that global tariff tensions would ease. Those expectations were soon tested.
The shocks, or the set of known unknowns and unknown unknowns, arrived together. Geopolitical upheaval, conflict in West Asia, tighter US monetary conditions, punitive tariffs and an uneven monsoon. Each posed a different challenge.
US intervention in Venezuela in January was followed by US and Israeli strikes on Iran at the end of February and a wider conflict extending into Lebanon. For India, which imports more than 85 percent of its crude requirements, energy-price volatility carried immediate fiscal and external-sector risks. Gold reached a record in January before losing more than a quarter of its value by June. The Federal Reserve’s shift from rate cuts to rate hikes tightened global liquidity, higher US tariffs challenged exporters, and deficient rainfall added pressure to domestic food supplies.
The buffers that helped India hold firm
India’s ability to withstand this suggests that the policy buffers built over recent years mattered. The Narendra Modi government’s fiscal choices and the Reserve Bank of India’s (RBI's) external-sector management are central to that argument. A caveat, however, should be in order. Neither, however, should be treated as the sole explanation for a complex economic outcome.
India's fiscal deficit for FY27 is budgeted at 4.3 per cent of GDP (approximately Rs 16.96 lakh crore). Fiscal deficit for the first half of FY27 reached Rs 7.14 lakh crore. This accounts for 42.1 per cent of the full-year Budget Estimate. While it is up from 36.5 per cent during the same period in FY26, the significance lies in the combination of consolidation and investment. The government maintained its fiscal glide path while continuing to fund infrastructure.
The external buffer was equally important. Foreign exchange reserves stood at $717.06 billion at the end of October, enough for roughly 11 months of merchandise imports. Alongside foreign direct investment and remittances, reserves provided room to manage volatility rather than respond to every market movement with a policy reversal.
Inflation remains the caution flag
Inflation is the necessary qualification to any account of resilience. Retail CPI inflation rose from 5.54 percent in September to 6.09 percent in October, inching ahead of the RBI’s tolerable threshold of 6 per cent. That is not a trajectory to dismiss as a minor inconvenience, particularly when oil volatility and uneven rainfall are already exerting pressure. Excise-duty adjustments, diversified crude sourcing and food-buffer management may have helped limit the transmission of those shocks.
Domestic money cushioned the market
The equity market tells a related story about the changing composition of Indian savings. Foreign institutional investors sold Rs 4.55 lakh crore of equities over the year (Samvat 2082), while domestic institutional and retail investors bought Rs 8.55 lakh crore. Domestic participation helped absorb the selling pressure.
The Nifty finished Samvat 2082 down 3 percent, even as midcap and smallcap indices ended slightly higher. A 9 percent rally in the final week brought the benchmark back to roughly 25,000, before a 44-point decline in the Muhurat session. Against the scale of the year’s disruption, the limited annual fall is notable.
The lesson for New Delhi and the signal from the government’s macroeconomic managers is, therefore, one of walking the talk on fiscal credibility without weakening productive investment. India’s performance over the past year makes a persuasive case that preparation has reduced vulnerability.
