Crisil Projects India’s GDP growth at 6.5pc for FY26 amid strong domestic demand

THEBUSINESSBYTES BUREAU

NEW DELHI, MAY 29, 2025

Global ratings agency Crisil on Thursday projected India’s gross domestic product (GDP) to grow at 6.5 per cent in fiscal year 2026, supported by a rebound in domestic consumption, easing inflation, and accommodative monetary policy.

In its latest economic outlook, Crisil noted that healthy agricultural output, driven by a favourable monsoon forecast and cooling inflation, is likely to boost consumer sentiment and support industrial activity.

“We expect domestic consumption demand to improve, driven by healthy agricultural growth, easing inflation supporting discretionary spend, rate cuts by the Reserve Bank of India’s Monetary Policy Committee (MPC), and income tax relief this fiscal,” the agency said.

The India Meteorological Department has forecast an above-normal monsoon this year — 106 per cent of the long-period average — a development that is expected to enhance farm output and keep food inflation in check.

Adding to the positive macroeconomic outlook, Crisil Intelligence expects global crude oil prices to remain subdued, averaging between $65 and $70 per barrel, significantly lower than the $78.8 per barrel average recorded in the previous fiscal. This will likely reduce input costs for manufacturers and help curb inflationary pressures.

The Reserve Bank of India, which has already cut the benchmark repo rate by 50 basis points (bps) until April, is expected to slash rates by another 50 bps in the current fiscal, Crisil said. The reduction in lending rates has begun to filter through the banking system, aiding consumer and business demand.

However, Crisil also cautioned about potential external headwinds, including trade tensions and global economic uncertainty, which could temper India’s growth momentum.

April data from the Ministry of Statistics and Programme Implementation (MoSPI) revealed a mixed performance across sectors. Industrial output showed resilience in certain areas, with capital goods production rising sharply and consumer durables — including electronics, refrigerators, and TVs — recording a 6.4 per cent year-on-year growth in November, reflecting rising consumer incomes.

Export performance remained uneven. While merchandise exports surged by 9 per cent in April (in nominal terms) compared to just 0.7 per cent in March, export-oriented sectors like pharmaceuticals and chemicals witnessed slower production amid recent US tariff announcements. Conversely, sectors such as machinery and readymade garments benefitted from front-loaded orders.

Meanwhile, the infrastructure sector reported 4 per cent growth, buoyed by continued government spending on large-scale projects in highways, railways, and ports.

Despite global uncertainties, Crisil remains optimistic about India’s medium-term growth prospects. “Strong domestic fundamentals and policy support are expected to cushion the economy and keep it on a steady growth trajectory,” the agency noted.