Crisil Forecasts India's GDP Growth at 6.5% in FY2026 Amidst Challenges

Synopsis

According to Crisil, India is set to maintain a GDP growth rate of 6.5% for fiscal 2026, despite global geopolitical challenges and trade tensions. Key factors include improved domestic consumption, a favorable monsoon, and low commodity prices.

Key Takeaways

India's GDP growth is estimated at 6.5% for fiscal 2026.
Geopolitical and trade uncertainties persist, mainly due to U.S. tariffs.
Discretionary spending is expected to rise, aided by tax benefits.
Manufacturing growth to average 9.0% annually from 2025-2031.
Services sector continues to be the primary growth engine.

New Delhi, March 6 (NationPress) India's real gross domestic product (GDP) growth is projected to remain stable at 6.5 percent for fiscal 2026, despite the various uncertainties arising from geopolitical shifts and trade-related complications initiated by U.S. tariff actions, according to a report from Crisil released on Thursday.

The forecast is predicated on two key assumptions: another cycle of normal monsoon and sustained low commodity prices.

Factors such as decreasing food inflation, tax incentives outlined in the Union Budget 2025-2026, and reduced borrowing costs are anticipated to boost discretionary spending, as indicated in the report.

Growth is gradually returning to pre-pandemic levels as fiscal stimuli stabilize and the high base effect diminishes.

Moreover, the latest Purchasing Managers Index (PMI) data indicates that India continues to lead among major economies.

“India’s resilience is being tested again. Over the past few years, we have established several protective measures against external shocks - such as robust economic growth, a low current account deficit, manageable external public debt, and sufficient forex reserves - which offer considerable policy flexibility,” stated Crisil Managing Director and CEO, Amish Mehta.

Although challenges remain, demand driven by consumption in both rural and urban areas will be vital for short-term growth.

“In addition, ongoing investments and improvements in efficiency will support medium-term growth. We anticipate that both manufacturing and services will contribute to growth through fiscal 2031,” Mehta further commented.

The report forecasts that manufacturing growth will average 9.0 percent annually from fiscals 2025-2031, rising from an average of 6 percent during the pre-pandemic decade.

The services sector is expected to continue being the main driver of growth. Consequently, the contribution of manufacturing to GDP is projected to rise to 20 percent from 17 percent in fiscal 2025, according to the report.

Decreased inflation and fiscal consolidation have paved the way for potential policy rate reductions.

“We foresee an additional 50-75 basis point decrease in rates over the next fiscal year, although the pace and extent of these cuts could be influenced by the slowing rate cuts from the U.S. Federal Reserve and weather-related uncertainties,” the report noted.

India has consistently improved its growth advantage over advanced nations through infrastructure development and economic reforms, including process enhancements.

“Robust GDP growth, a low current account deficit, and ample forex reserves provide a buffer and flexibility in policy, but do not completely shield the country from external shocks. The risks surrounding the 6.5 percent growth forecast are primarily tilted to the downside due to heightened uncertainty from the U.S.-led tariff conflict,” remarked Crisil's Chief Economist, Dharmakirti Joshi.