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According to a recent report by ICRA it reveals that, intensifying risks such as geopolitical tensions in West Asia, volatility in financial markets, and uncertain trade policies are likely to pose downside risks to the India's GDP growth forecast.
The report reveals that, India's GDP growth for Fiscal Year 2026 (FY2026) to remain at 6.2%, a slight moderation from the 6.5% estimated for FY2025. This outlook is contingent on a well-distributed monsoon and crude oil prices averaging around USD 70 per barrel. ICRA sees, the economic activity in the first two months of Q1 FY2026 has shown a mixed trend, with only nine of seventeen non-agricultural indicators improving compared to Q4 FY2025. The early onset of monsoons in May 2025 negatively impacted the electricity and mining sectors. Despite this, the output of summer crops is expected to grow at a healthy pace, and the agricultural Gross Value Added (GVA) is projected to rise by approximately 4.5 per cent in Q1 FY2026. For the full FY2026, agricultural GVA is anticipated to be 3.5-4.0 per cent, assuming a normal monsoon. On the other hand, Urban consumption prospects remain strong, driven by income tax relief, potential rate cuts, and softening food inflation. ICRA projects CPI inflation to cool to 3.5 per cent in FY2026 from 4.6 per cent in FY2025. A final 25 basis points rate cut is not ruled out in October 2025, following a likely pause in August 2025. India's Current Account Deficit (CAD) is estimated to be manageable at 1.1-1.2 per cent of GDP in FY2026, assuming crude oil averages around USD 70 per barrel. Additionally, government capital expenditure is expected to remain a significant driver of investment demand, with a projected healthy growth of 14.2 per cent in FY2026 if additional fiscal space is utilized for capex. Private capital expenditure, however, is expected to remain measured due to weak external demand, global headwinds from tariff-related developments, and increased imports from China. (ANI)
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