Crisil Forecasts 6.5% GDP Growth for India in FY 2026 Amid US Tariffs

Although US tariff increases pose a significant risk to growth predictions, global credit rating firm Crisil estimated a 6.5 percent GDP growth for India in fiscal 2026, with risks leaning towards the downside. Crisil anticipates the RBI's monetary easing will provide some counterbalance to the external challenges.

"Interest rate cuts, income tax relief and easing inflation are expected to provide tailwinds to consumption this fiscal, while the expected normal monsoon will support agricultural incomes," the report mentioned.

Furthermore, the expected decrease in worldwide crude oil prices due to a possible global slowdown is projected to offer further assistance to domestic growth, it mentioned.

Increases in US tariffs pose a significant risk to Crisil's GDP growth prediction for fiscal 2026, since uncertainty regarding how long these tariffs will last and their frequent changes may hinder investment.

In FY25, enhanced growth in the production of capital, infrastructure, and construction goods during the second half indicates a slow recovery in construction/capital expenditure activities in the latter portion of the fiscal year.

"The latest RBI Consumer Confidence Survey indicates an improvement in March, in both rural and urban areas. All these factors corroborate the recovery in domestic demand. Healthy rabi output and easing inflation in the fourth quarter also bode well for consumption demand," the report mentioned.

Industrial expansion, indicated by the Index of Industrial Production (IIP), decelerated to 2.9 percent in February from 5.2 percent in January (adjusted upward from 5.0 percent), influenced by reduced output growth in the mining and manufacturing industries, whereas electricity saw an increase.

"On average, IIP growth stood at 4.0 per cent in the fourth quarter as of February, broadly in line with the 4.1 per cent recorded in the December quarter," said Crisil.

With data now available for eleven months of FY25, the inherent momentum within the sub-sectors of IIP can be emphasized. The IIP manufacturing showed improved performance on average during the latter half of fiscal 2025. This increased growth in areas such as petroleum products, machinery, and textiles occurred in the second half.