New Delhi, Sep 1 Despite downside risks owing to the US tariffs and slowing global economy, India’s growth will remain healthy given expectations of robust domestic private consumption, along with supportive government spending, a report showed on Monday.
In Crisil’s view, private consumption is poised to be the primary driver of GDP growth in fiscal 2026. It expects GDP to grow 6.5 per cent this fiscal with downside risks.
The report believes four key factors will support private consumption in India.
“A healthy monsoon will support the agriculture sector and rural incomes. Monsoon has progressed well so far, at 106 per cent of the long period average as on August 28. Kharif sowing is up 3.4% on-year as on August 22,” said the Crisil report.
Robust agricultural production on the back of the favourable monsoon will help keep food inflation in check, allowing for space in household budgets for discretionary spending. Inflation has already eased significantly to 2.4 per cent so far this fiscal (April-July average) compared with 4.6 per cent in the last fiscal.
“The RBI’s 100-bps cut in the repo rate so far in 2025 and a cut in the cash reserve ratio (CRR), to be carried out in four tranches between September and December) are expected to support consumption in the urban segment,” the report noted.
Transmission of rate cuts to bank lending and deposit rates is going on. Fiscal policy support in the form of income tax relief and expected increased spending on key rural schemes would also encourage private consumption. The government has reduced income tax rates under the new tax regime, which will increase the disposable income of the middle class.
The proposed change in the Goods and Services Tax (GST) structure, which may reduce the tax in some consumer segments, could also support growth this fiscal, depending on when the proposed changes come into effect.
However, it is too early to assess the impact as this as the changes are yet to be finalised, the report mentioned.
India’s real gross domestic product (GDP) growth was at a five-quarter high of 7.8 per cent on-year in the first quarter of fiscal 2026.
Domestic private consumption growth strengthened despite a high base effect, boosting both manufacturing and services. Higher government spending in the first quarter contributed to a sharp rise in government consumption expenditure and healthy fixed investment growth.
Export growth was fuelled by the front-loading of goods exported in anticipation of higher US tariffs, said the report.
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