Indian economy is to grow at 6.6% in 2025-26, up from 6.4% in the current fiscal year, India Ratings and Research (Ind-Ra) projected on Wednesday.
Ind-Ra believes investments will be a key growth driver for the Indian economy in FY26, like in FY22 and FY24.
Ind-Ra believes that the Indian economy is facing monetary, fiscal, and external tightening.
While it expects monetary conditions to ease now, the fiscal and external tightening is expected to continue in FY26 as well, it said.
Notably, the GDP growth till FY24 was impacted by the aftereffects of Covid-19, even the base effect impacted the quarterly GDP growth.
While the June quarter GDP growth of FY25 was impacted by the combination of a strong base effect and the general elections in May 2024, the growth in the July-September period witnessed the extended impact of weak private sector capex.
Ind-Ra expected the retail inflation in FY26 to average at 4.4%, lower than FY25 forecast of 4.9%.
As per the government data, India’s retail inflation in November was recorded at 5.48% as compared to 6.21% logged in October. The inflation data is in line with the Reserve Bank of India’s 2-6% comfort band.
“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,” Ind-Ra said.
Further is said that the merchandise trade account is expected to remain in deficit of USD 308 billion in FY26 (FY25: USD277.4 billion, FY24: USD 244.9 billion).