India to grow 6.5% in fiscal 2026 despite challenges: Crisil Intelligence
CRISIL's forecast for India's economy depends on two key factors. The rating agency anticipates that normal monsoon and commodity prices will continue to remain soft, which will keep the food prices stable.
Cooling food inflation, the tax benefits announced in the Union Budget 2025-2026, and lower borrowing costs are expected to drive discretionary consumption, said the report.
As per the Crisil Intelligence, the growth is now returning to pre-pandemic rates as fiscal impulse normalizes and the high-base effect wears off. Even with that, the high-frequency Purchasing Managers Index (PMI) data reveals that India maintains its pole position among major economies.
"India's resilience is being tested again. Over the past few years, we have built a few safe harbors against exogenous shocks--healthy economic growth, low current account deficit and external public debt, and adequate forex reserves--which provide ample policy latitude. So, while the waters can turn choppy, consumption-led rural and urban demand will be crucial to short-term growth," said Amish Mehta, Managing Director and CEO, Crisil Ltd.
He further added that, on the other hand, continuing investments and efficiency gains will aid in the medium term.
"We foresee both manufacturing and services supporting growth through fiscal 2031," he added.
As per the credit rating company, the manufacturing growth is expected to average 9.0 per cent per year over fiscals 2025-2031, up from 6 per cent on average in the prepandemic decade. The services sector is expected to grow slower, though it will remain the primary growth driver. As a result, the share of manufacturing in GDP will increase to 20 per cent from 17 per cent in fiscal 2025.
In fiscal 2026, the credit rating company expects the recent softening in food inflation will continue and pull down the headline further.
Inflation softened in fiscal 2025, led by lower non-food inflation, while food inflation has risen.
The credit rating company further anticipated another 50-75 basis point rate reduction over the next fiscal.
"India has continued to raise its growth premium over advanced countries through infrastructure buildout and economic reforms, including process improvement. Healthy GDP growth, a low current account deficit and adequate forex reserves provide a buffer and policy flexibility but do not insulate the country from external shocks. The risks to the growth forecast of 6.5% are therefore tilted to the downside given elevated uncertainty due to the US-led tariff war," said Dharmakirti Joshi, Chief Economist, Crisil Ltd.
As per the report, sharp government focus on expanding capabilities in new-age sectors, achieving higher localisation and driving backward integration in key value chains and reforms such as the Make in India initiative, the phased manufacturing programme and PLI are showing green shoots across sectors.
The report, however, added that the global environment presents many headwinds.
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