New Delhi, March 6 India's real gross domestic product (GDP) growth would be steady at 6.5 per cent in fiscal 2026, despite uncertainties stemming from geopolitical turns and trade-related issues led by US tariff actions, a Crisil report said on Thursday.
The forecast is based on two assumptions. These include another spell of normal monsoon and commodity prices continuing to remain soft.
Cooling food inflation, the tax benefits announced in the Union Budget 2025-2026, and lower borrowing costs are expected to drive discretionary consumption, the report mentioned.
Growth is now returning to pre-pandemic rates as fiscal impulse normalises and the high-base effect wears off.
Even with that, the high frequency Purchasing Managers Index (PMI) data reveals that India maintains its pole position among major economies.
"India’s resilience is being tested again. Over the past few years, we have built a few safe harbours against exogenous shocks - healthy economic growth, low current account deficit and external public debt, and adequate forex reserves - which provide ample policy latitude," Crisil Managing Director and CEO, Amish Mehta, said.
So, while the waters can turn choppy, consumption-led rural and urban demand will be crucial to short-term growth.
"On the other hand, continuing investments and efficiency gains will aid in the medium term. We foresee both manufacturing and services supporting growth through fiscal 2031," Mehta added.
According to the report, manufacturing growth is expected to average 9.0 per cent per year over fiscals 2025-2031, up from 6 per cent on average in the pre-pandemic decade.
The services sector will remain the primary growth driver. As a result, the share of manufacturing in GDP will increase to 20 per cent from 17 per cent in fiscal 2025, the report predicted.
Lower inflation and fiscal consolidation have opened the doors for policy rate cuts.
"We expect another 50-75 basis point rate reduction over the next fiscal, although slowing US Fed rate cuts and weather-related risks could influence the timing and quantum of these cuts," the report noted.
India has continued to raise its growth premium over advanced countries through infrastructure buildout, and economic reforms, including process improvement.
"Healthy GDP growth, a low current account deficit and adequate forex reserves provide buffer and policy flexibility, but do not insulate the country from external shocks. The risks to the growth forecast of 6.5 per cent are, therefore, titled to the downside given elevated uncertainty due to the US-led tariff war," Crisil's Chief Economist, Dharmakirti Joshi, said.
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