India’s GDP Growth Steady at 6.5% Amid Global Challenges
India’s real GDP growth is projected to hold steady at 6.5% for the fiscal year 2026, according to a recent report by CRISIL Intelligence. This forecast comes despite ongoing global uncertainties, including geopolitical tensions and trade disputes stemming from U.S. tariffs. Key factors influencing this outlook include expectations of a normal monsoon and stable commodity prices, which are anticipated to help control food inflation.
Factors Supporting Economic Stability
The CRISIL report highlights several factors that are expected to bolster India’s economic performance. Cooling food inflation, tax incentives from the Union Budget for 2025-26, and reduced borrowing costs are all likely to enhance discretionary consumer spending. As the effects of fiscal stimulus diminish and the high-base effect recedes, India’s economic growth is expected to gradually return to pre-pandemic levels. High-frequency data from the Purchasing Managers’ Index (PMI) indicates that India will continue to outperform many major global economies.
Amish Mehta, managing director and CEO of CRISIL Ltd, emphasized the resilience of the Indian economy. He noted that the country has developed safeguards against external shocks, including strong economic growth, a low current account deficit, manageable external public debt, and substantial foreign exchange reserves. These factors provide policymakers with the flexibility needed to navigate challenges, with domestic demand—both rural and urban—playing a crucial role in short-term growth.
Sectoral Growth Projections
CRISIL’s analysis indicates robust growth in the manufacturing sector, which is expected to expand by 9% annually from fiscal 2025 to 2031, a significant increase from the 6% growth rate observed in the pre-pandemic decade. While the services sector is projected to experience slower growth, it will remain a key driver of overall economic expansion. Consequently, the share of manufacturing in India’s GDP is anticipated to rise from 17% in fiscal 2025 to 20% by 2031.
The report also predicts a further decline in food inflation for fiscal 2026, contributing to lower overall inflation levels. This follows a trend observed in fiscal 2025, where inflation eased due to reduced non-food inflation, despite rising food prices. Additionally, CRISIL expects a potential interest rate cut of 50-75 basis points in the upcoming fiscal year, which could further stimulate economic activity.
Challenges Ahead in Global Trade
Despite the positive outlook, CRISIL warns that the global trade environment remains a significant challenge. Ongoing uncertainties surrounding tariffs and trade policies could hinder India’s ability to acquire advanced technologies, scale up industries, and enhance exports. Dharmakirti Joshi, chief economist at CRISIL Ltd, pointed out that while India’s economic indicators such as healthy GDP growth and adequate forex reserves provide a buffer against external shocks, the risks to the 6.5% growth forecast are tilted to the downside due to the unpredictable nature of the U.S.-led tariff war.
The report underscores the Indian government’s commitment to expanding capabilities in emerging industries, increasing localization, and strengthening key value chains. Initiatives like Make in India, the phased manufacturing program, and the production-linked incentive (PLI) scheme are already showing positive results across various sectors, positioning India for sustained economic growth in the years to come.
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