India’s gross domestic product (GDP) is projected to grow at 6.5% in the current fiscal year (FY26), driven by improving domestic consumption and other positive indicators, according to a report released by Crisil on Monday.
The Crisil Intelligence near-term outlook highlighted global uncertainty stemming from US tariff actions as the primary risk to India’s growth. However, it noted that the economy is likely to be supported by an above-normal monsoon, income tax relief, and the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) rate cuts.
GDP growth accelerated to 7.4% year-on-year in the fourth quarter of FY25, up from 6.4% in the previous quarter. Overall, GDP grew by 6.5% in FY25.
The report also pointed to a significant decline in inflation, with the Consumer Price Index (CPI) inflation falling to 2.1% in June – its lowest in 77 months – driven by negative food inflation.
“Given the current inflation trajectory, an above-normal monsoon forecast, and expectations of soft global oil and commodity prices, we project average CPI inflation to ease to 4% this fiscal, down from 4.6% last fiscal,” the report stated.
Crisil also anticipates one more repo rate cut by the RBI this fiscal, followed by a pause.
“The MPC cut the policy rate by 100 basis points between February and June 2025. Its shift in stance from accommodative to neutral in June reflects the front-loading of rate cuts and a data-dependent approach going forward,” it said. The 100 bps Cash Reserve Ratio (CRR) cut will be implemented in four tranches between September and November 2025.
On the fiscal front, the Union Budget has targeted a reduction in the central government’s fiscal deficit to 4.4% of GDP this fiscal, down from 4.8% in FY25.
Gross market borrowing is estimated at ₹14.8 lakh crore for this fiscal – 5.8% higher year-on-year – with 54% of the budgeted borrowing planned for the first half of the fiscal, the report added.
As of May, the fiscal deficit stood at 0.8% of the full-year budget target, significantly lower than the 3.1% recorded in the same period last fiscal. This was attributed to higher revenue receipts and lower revenue expenditure.
The report further projects India’s current account deficit (CAD) to average 1.3% of GDP in FY26, compared to 0.6% in the previous fiscal year.
(IANS)