India’s GDP Growth Forecast at 6.5% for FY26: Crisil

Crisil, the global ratings and analytics agency, has projected India’s gross domestic product (GDP) growth at 6.5% in fiscal 2026 (FY26), supported by improving domestic consumption, easing inflation, and favourable monetary policy. The agency’s latest economic outlook highlights a cautiously optimistic scenario for India, backed by robust agricultural output, policy support, and resilient industrial activity, while acknowledging the risks posed by external headwinds and global trade uncertainties.

Domestic Consumption to Drive Growth Momentum

Crisil’s forecast rests on a core assumption that domestic consumption demand will improve steadily in FY26. Several key factors are expected to contribute to this recovery:

• Healthy agricultural growth, aided by favourable monsoon forecasts
• Easing inflation, supporting discretionary spending
• Interest rate cuts by the RBI’s Monetary Policy Committee (MPC)
• Income tax relief, which will boost disposable income

These factors are likely to reinvigorate consumer sentiment, especially in rural areas, where inflationary pressures have weighed on demand over the past year.

Agriculture to Benefit from Above-Normal Monsoon

The India Meteorological Department (IMD) has forecast an above-normal monsoon in 2025, pegged at 106% of the long-period average (LPA). This bodes well for agricultural production, which is crucial for food security, inflation management, and rural income generation.

A robust monsoon is also expected to have a positive spillover effect on sectors like fertilizers, farm machinery, rural consumption, and agribusinesses, thereby amplifying the broader economic impact.

Easing Oil Prices to Support Macroeconomic Stability

Crude oil prices, a significant determinant of India’s import bill and inflation, are expected to remain subdued in FY26. According to Crisil Intelligence, the average oil price is projected at $65–$70 per barrel, considerably lower than the $78.8 per barrel average in the previous fiscal year.

This price moderation is likely to reduce the burden on India’s current account deficit, lower transport and input costs, and support both consumer spending and corporate margins, especially in energy-intensive sectors.

Monetary Policy Easing: Repo Rate Cuts to Stimulate Growth

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is anticipated to cut the repo rate by another 50 basis points during FY26. This would follow a cumulative 50 bps cut until April, marking a clear shift toward accommodative monetary policy.

The impact of these rate cuts is already visible, with bank lending rates beginning to ease, enhancing credit availability and affordability, particularly for sectors such as:

• Consumer durables
• Real estate and housing
• Automobiles
• Small and medium enterprises (SMEs)

This monetary support is expected to translate into higher consumer demand and investment activity.

Industrial Activity: Mixed Performance with Key Growth Areas

India’s industrial output has shown a mixed trend recently, with the Index of Industrial Production (IIP) slowing in April amid global uncertainties and US tariff announcements. However, specific segments have reported encouraging growth:

Export-Oriented Sectors:

• Pharmaceuticals and chemicals witnessed a slowdown
• Machinery and readymade garments benefited from front-loaded exports
• Merchandise exports grew sharply by 9.0% in April (nominal terms) compared to **0.7% in the previous month)

Consumer Goods:

• Consumer durables outperformed non-durables
• Production of durables like electronic goods, refrigerators, and televisions rose by 6.4% in November, reflecting increased consumer demand and rising household incomes

Capital and Intermediate Goods:

• Capital goods output saw a sharp uptick, indicating rising private sector investment
• Intermediate goods registered a mild acceleration, suggesting healthy production linkages across industries

Infrastructure Sector Growth Driven by Public Investment

India’s infrastructure sector registered a 4% growth, largely propelled by big-ticket government projects in:

• Highways
• Railways
• Ports

These projects not only contribute to immediate economic activity but also enhance long-term productivity, connectivity, and logistics efficiency across the country. The government’s continued focus on infrastructure is aligned with its vision for a $5 trillion economy, while also creating jobs and stimulating associated industries like steel, cement, and construction equipment.

External Headwinds and Global Risks Remain

While the domestic outlook is buoyant, Crisil cautions against downside risks stemming from the global economic environment. Key concerns include:

• Geopolitical tensions
• Trade disruptions, especially in light of new tariffs by the United States
• Sluggish demand in major export markets
• Volatility in global commodity prices

These factors could impact India’s export performance, capital flows, and currency stability, thereby influencing the overall growth trajectory.