India’s Economic Growth Forecast for FY26 – Crisil Report

Growth Projection

• India’s economy is projected to grow at 6.5% in FY26.
• Growth driven by strong domestic demand despite global uncertainties (geopolitical issues, US-led trade actions).

Key Assumptions & Drivers

• Normal monsoon & stable commodity prices.
• Cooling food inflation expected to ease cost pressures.
• Tax benefits from the budget to boost consumption.
• Lower borrowing costs encouraging spending and investment.

Sectoral Outlook

• Manufacturing Growth: Expected to average 9% annually between FY25-FY31 (compared to 6% pre-pandemic).
• Manufacturing’s GDP share to increase to 20% by FY31, driven by investments and efficiency improvements.
• Services sector remains primary growth driver, albeit at a slower pace.

Economic Resilience

• India has built “safe harbours” against external shocks:
  • Healthy economic growth.
  • Low current account deficit & external public debt.
  • Adequate forex reserves, providing policy flexibility.
• Short-term growth: Driven by urban and rural consumption.
• Medium-term growth: Supported by investments and efficiency gains.

Inflation Outlook

• Inflation softened in FY25, mainly due to lower non-food inflation.
• Food inflation remained high but is expected to decline further in FY26.
• This will help lower headline inflation and support economic stability.