Forecasting India's Economic Growth: A Vision for 2025-26

India Ratings and Research projects India's economy to grow by 6.6% in 2025-26, up from 6.4% this fiscal year. Investments remain crucial for growth. Challenges include fiscal, monetary, and external tightening, but easing monetary conditions offer hope. Inflation is expected to decline while trade deficits rise.

In its latest report, India Ratings and Research (Ind-Ra) forecasts the Indian economy to achieve a 6.6% growth rate in the fiscal year 2025-26, compared to 6.4% in the current year. The agency highlights investments as a crucial growth driver, alongside recovering from a previous cyclical slowdown.

Ind-Ra observes that the Indian economy had been experiencing a cyclical slowdown, impacted by Covid-19's aftermath and the base effect, but anticipates a rebound starting December 2025. Factors like monetary, fiscal, and external tightening still pose challenges, although easing monetary conditions provide some optimism.

The agency also warns of potential threats from a tariff war or capital outflows. Despite anticipated setbacks, Ind-Ra predicts retail inflation to average 4.4% in FY26, lower than the previous year's forecast, while merchandise trade deficits are likely to grow further.

(With inputs from agencies.)