Growth: Indian economy to grow 6.6% in FY26, says Ind-Ra
Virendra Pandit
New Delhi: Driven by fresh investments and likely easing interest rates, India will grow at a 6.6 percent rate in the next financial year, 2025-26, a leading rating agency said on Wednesday.
The Indian economy has witnessed a cyclical growth slowdown in the past three quarters this year, which it expects to reverse from the December quarter until March 2025.
India Ratings and Research (Ind-Ra), a Fitch group company, on Wednesday, projected the Indian economy to grow at 6.6 percent in 2025-26, up from 6.4 percent in the current fiscal year (FY25).
Investments will be a key growth driver for the Indian economy in FY26, like in FY22 and FY24, it said, according to the media reports.
India’s GDP growth until FY24 was impacted by the aftereffects of the COVID-19 pandemic, while the base effect affected the quarterly GDP growth.
The reports said the first quarter GDP (April-June 2024) growth of FY25 was impacted by the combination of a strong base effect and the general elections in May 2024, while the growth in the second quarter (July-September) witnessed the extended impact of weak private sector capital expenditures.
Ind-Ra said the Indian economy is facing monetary, fiscal, and external tightening. While it expects monetary conditions to ease now, the fiscal and external tightening might continue in FY26 as well, the agency said.
“Nonetheless, the FY26 GDP growth is expected to be the same as India’s best decadal growth (FY11-FY20),” Devendra Kumar Pant, Chief Economist and Head of Public Finance, Ind-Ra, said.
It said growth and inflation forecast could, however, be affected by any tariff war, and potential capital outflow, if the dollar continues to strengthen.
The rating agency expects the retail inflation in FY26 to average 4.4 percent, lower than the FY25 forecast of 4.9 percent.
“The timing of rate cut would depend on how the forthcoming data — arithmetic of the FY26 Union Budget, inflation trajectory, and evolving domestic and global landscape — gels with the RBI’s flexible inflation targeting approach.”
The merchandise trade account is expected to remain in a deficit of USD 308 billion in FY26 (vis-à-vis FY25: USD277.4 billion, FY24: USD 244.9 billion), Ind-Ra said.
