India’s GDP growth is expected to be steady at 6.5 per cent in fiscal 2025-2026 with the upcoming monsoon season likely to be normal and commodity prices to remain soft. Private consumption is expected to recover further, while investment growth hinges on private Capex, according to a Crisil report released on Monday.
Private consumption is expected improve further, on expectations of healthy agricultural production and cooling food inflation. Softer food inflation should create space in household budgets for discretionary spending, the report states. Second, the tax benefits announced in the Union Budget 2025-2026 and increased allocations towards key asset and employment-generating schemes are expected to support consumption.
Third, easing monetary policy by the Reserve Bank of India (RBI) is expected to support discretionary consumption, the report further states. The Crisil report also expects the RBI’s Monetary Policy Committee (MPC) to cut the repo rate by 50-75 bps in fiscal 2026.
The central bank’s recent liquidity-easing measures and easier regulations for non-banking financial companies are expected to transmit the benefits from an easier monetary policy to the broader economy, it added.
The report points out that investment growth hinges on a sustained pick-up in private corporate investment, as the government normalises Capex to meet its fiscal deficit target for the next year. It further states that risks to the growth outlook are tilted to the downside, given the elevated uncertainty because of the US-led tariff war.
With domestic private consumption expected to hold up, imports are expected to remain healthy in fiscal 2026, while exports growth could be subdued because of potential reciprocal tariffs imposed by the US. The escalating global trade uncertainty could also lead to increased imports from China as a result of trade redirection, the report added.
Citing the official figures, the Crisil report mentions that GDP growth for 2024-25 is estimated at 6.5 per cent, slower than 9.2 per cent in the previous fiscal. However, growth remains close to the pre-pandemic decadal average of 6.6 per cent between fiscals 2011 and 2020 and will allow India to retain its tag of fastest growing large economy.
The GDP is expected to pick up further to 7.6 per cent in the fourth quarter to deliver full current fiscal year growth of 6.5 per cent. Real GDP growth has already accelerated to 6.2 per cent year-on-year in the third quarter of this fiscal, higher than 5.6 per cent. Growth in agriculture picked up due to sustained momentum from a normal monsoon (5.6 per cent versus 4.1 per cent in the previous quarter) while growth in services held up broadly 7.4 per cent.
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