Global credit rating agency Crisil on Monday projected India’s GDP to grow by 6.5% in fiscal 2026, while cautioning that US tariff hikes remain a significant downside risk to the forecast.
Despite external headwinds, Crisil expects monetary easing by the Reserve Bank of India (RBI) to offer some cushion, along with other positive domestic developments. “Interest rate cuts, income tax relief, and easing inflation are expected to boost consumption this fiscal. Additionally, a normal monsoon could support agricultural incomes,” the report stated.
Crisil also anticipates that a decline in global crude oil prices, potentially driven by a global slowdown, will provide further support to domestic economic activity.
However, US tariff hikes pose a major challenge, with uncertainties around their duration and frequent revisions likely to dampen investor sentiment and slow investments, the agency warned.
For the current fiscal (FY25), Crisil observed that the second half showed signs of improvement, particularly in capital, infrastructure, and construction goods output, indicating a gradual pickup in construction and capital expenditure activities.
High-frequency indicators further reinforce these growth prospects. The RBI’s latest Quarterly Industrial Outlook Survey indicates sequential strengthening in demand during Q4 FY25, while the Consumer Confidence Survey shows improved sentiment in both rural and urban areas in March.
“A healthy rabi output and easing inflation in the fourth quarter also support stronger consumption demand,” Crisil added.
Industrial growth, measured by the Index of Industrial Production (IIP), moderated to 2.9% in February from 5.2% in January (revised from 5.0%), largely due to slower growth in the mining and manufacturing sectors, although the electricity sector recorded an uptick.
Overall, IIP growth averaged 4.0% in Q4 FY25, in line with 4.1% in Q3, with manufacturing sub-sectors like petroleum products, machinery, and textiles performing better in the second half of FY25.
(With IANS inputs)
