India’s GDP to Grow at 6.5% in FY26, Says CRISIL: Domestic Demand and Easing Rates to Drive Recovery
By TheTrendingPeople.com | Updated: May 28, 2025
India’s economy is expected to grow at a steady 6.5% in fiscal year 2026, according to a fresh forecast by CRISIL. The global ratings and research agency believes a recovery in domestic consumption, supported by favourable monsoon predictions, easing inflation, and expected rate cuts by the Reserve Bank of India (RBI), will serve as key drivers of growth over the next fiscal year.
Domestic Consumption Back in Focus
CRISIL notes that consumer sentiment is expected to rebound due to a mix of economic tailwinds. Chief among these is the anticipated healthy agricultural output, thanks to the India Meteorological Department’s projection of an above-normal monsoon, estimated at 106% of the long-period average. This is likely to boost rural income, control food inflation, and sustain spending in rural and semi-urban markets.
Additionally, lower inflation levels and a series of expected repo rate cuts totaling 50 basis points by the RBI’s Monetary Policy Committee (MPC) could ease borrowing costs and revive discretionary consumer spending.
“The central bank has already cut the policy rate by 50 basis points until April 2025, and we expect another 50 basis points this fiscal,” CRISIL noted in its report. “Bank lending rates are already beginning to ease, which should support demand for consumer credit and housing.”
Income Tax Relief and Crude Oil Prices Support Outlook
CRISIL also pointed to anticipated income tax reliefs this fiscal year as a positive trigger for urban consumption. While details of tax policy changes are yet to be announced, any shift that puts more money in consumers’ hands will likely fuel demand for goods and services.
On the external front, global crude oil prices are projected to remain subdued, averaging between $65–$70 per barrel in FY26. That’s a sharp dip from the $78.8 per barrel average last fiscal year, which should help India manage its import bill and support price stability.
Industrial Growth Mixed but Promising
April’s industrial output data showed a mixed performance across sectors, reflecting the impact of global trade uncertainties, especially new tariff barriers from the United States. While some export-oriented industries such as pharmaceuticals and chemicals reported a slowdown, others like machinery and readymade garments benefitted from front-loaded exports.
Among consumer segments, durables outperformed non-durables, with a 6.4% increase in production of electronics, refrigerators, and TVs recorded in November — a strong sign of resurgent consumer demand amid rising incomes.
Capital goods — an indicator of long-term investment and industrial sentiment — posted sharp output growth, while intermediate goods showed a moderate uptick. This suggests improving confidence among businesses and early signs of capacity expansion.
Infrastructure Remains a Bright Spot
India’s infrastructure sector recorded a 4% growth, fueled by large-scale public spending. Projects in highways, railways, and ports continue to drive demand for cement, steel, and machinery. The government’s focus on physical infrastructure development — especially under its National Infrastructure Pipeline and PM Gati Shakti initiatives — is expected to remain a consistent growth engine.
External Risks Linger
Despite the optimism, CRISIL cautioned that external headwinds — including global trade tensions, protectionist policies by major economies, and sluggish recovery in key export markets — could pose downside risks to the forecast. Volatility in global commodity prices and geopolitical shocks remain key concerns.
What This Means for India
- Households may see a friendlier economic environment with lower loan rates and potential tax reliefs, giving more room for consumption.
- Businesses are likely to benefit from improved demand conditions and lower input costs, particularly energy.
- Policy makers will need to balance fiscal stimulus and reform with an eye on global risks and inflation control.
Growth with Caution
India’s projected GDP growth of 6.5% in FY26 paints a picture of cautious optimism. The domestic engine — led by consumption, infrastructure, and policy support — appears robust. However, the global landscape remains unpredictable. India’s ability to sustain growth amid external shocks will depend on how effectively it deepens internal demand, reforms key sectors, and manages macroeconomic stability.
