India is set to remain the fastest-growing major economy in the India-MENA corridor, with GDP projected to expand 6.9% in FY 2026-27 (ending 31 March), according to India Ratings & Research. This is a step down from the 7.4% estimated for FY 2026, as base effects, weaker global trade, and climate risks temper momentum. Looking ahead to 2026, India significantly outstrips its primary Gulf partners, with the UAE expected to grow at 5.2% and Saudi Arabia at 4.6%.

Internal stabilizers to soften shocks: Domestic buffers — including GST and income tax cuts as well as new trade agreements with Oman, the UK, and New Zealand — are expected to help the economy absorb external shocks, particularly from US tariffs.

In other macroeconomic news

Near-term signals are mixed: HSBC’s India Services Purchasing Managers’ Index slipped to an 11-month low of 58.0 in December, indicating slower expansion. Meanwhile, export orders accelerated amid steady overseas demand, a large part of which has been routed through Gulf trade and services corridors, while benign inflation kept cost pressures contained.

A friction point? More concerning for firms looking at the talent corridor is that hiring has stalled for the first time in 42 months. While the macro story remains robust, the operational situation in high-value sectors like IT and professional services — critical to the India-UAE CEPA — is facing a period of consolidation.

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