India’s Economic Growth Outlook for FY26
Strong Growth Expected
India’s economy is poised for strong growth. Experts predict that real GDP growth will exceed 6.5% in FY2025–26. Additionally, real Gross Value Added (GVA) growth is likely to surpass 6.3%. This positive outlook comes from a report by the rating agency Icra.
Key Factors Driving Growth
- Rural demand is increasing.
- Income tax relief boosts disposable income.
- Lower EMIs support economic expansion.
Inflation and Deficit Projections
Icra projects the Consumer Price Index (CPI) to stay above 4.2%. The Wholesale Price Index (WPI) is estimated to exceed 2.7% for the current financial year. The fiscal deficit is forecasted to be 4.4% of GDP. The current account deficit (CAD) is projected at -1% of GDP for FY26.
Positive Rural Demand
Rural demand is expected to remain strong. This is supported by Rabi cash flows and above-normal reservoir levels. Income tax cuts announced in the Union Budget 2025–26 will help. Expectations of interest rate cuts and moderating food inflation are also positive factors.
Trade and Investment Outlook
Services exports are likely to outpace merchandise exports. However, merchandise exports may remain slow in the near term. Public investment is expected to increase due to a 10.1% rise in the Centre’s capital expenditure budget for FY26.
Private sector capital expenditure may see limited growth. This is due to the uncertain trade policy environment and muted export outlook.
