Despite global challenges, India’s GDP to grow at 6.5% in fiscal 2026: CRISIL – The Times of India

India’s real GDP growth is expected to remain steady at 6.5 per cent for the 2026 fiscal, despite global uncertainties due to geopolitical shifts and trade tensions triggered by US tariff, a report by CRISIL Intelligence revealed on Thursday.
The credit rating agency’s forecast depends on two major factors: a normal monsoon and stable commodity prices, both of which are expected to keep food inflation in check.
The agency predicted that cooling food inflation, tax benefits from the Union Budget 2025-26, and lower borrowing costs will boost discretionary consumer spending. The report also noted that India’s economic growth would gradually return to pre-pandemic levels as the impact of fiscal stimulus will fade and the high-base effect subsides.
Despite these adjustments, high-frequency data from the Purchasing Managers’ Index (PMI) suggested that the country would continue to lead among major global economies.
“India’s resilience is being tested again,” said Amish Mehta, managing director and CEO of CRISIL Ltd. “Over the past few years, we have built safeguards against external shocks, including strong economic growth, a low current account deficit, manageable external public debt, and ample forex reserves. These provide policymakers with flexibility. While challenges remain, domestic demand—both rural and urban—will be crucial for short-term growth.”
The MD further added that sustained investment and efficiency improvements will support medium-term expansion. “We expect both manufacturing and services to drive growth through fiscal 2031,” he said.
Sector-wise growth
CRISIL projected that the manufacturing sector will grow 9 per cent every year between fiscal 2025 and 2031, up from 6 per cent in the pre-pandemic decade. The services sector, on the other hand, is expected to undergo slower growth, though it will continue to be the primary driver of growth.
As a result, the share of manufacturing in GDP is expected to rise from 17 per cent in fiscal 2025 to 20 per cent by 2031.
The report also anticipated further softening of food inflation in fiscal 2026, bringing down overall inflation levels. Inflation had already eased in fiscal 2025 due to lower non-food inflation, though food prices had risen.
Additionally, the rating agency also expected another 50-75 basis point rate cut in the next fiscal year.
India has strengthened its growth premium over advanced economies through infrastructure expansion and economic reforms, said Dharmakirti Joshi, chief economist at CRISIL Ltd.
“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,” Joshi added.
The report also highlighted the government’s sharp focus on expanding capabilities in emerging industries, increasing localisation, and strengthening key value chains. Initiatives such as Make in India, the phased manufacturing programme, and the production-linked incentive (PLI) scheme are already yielding positive results across sectors.
However, CRISIL also warned that the global trade environment continues to pose a challenge. Ongoing uncertainties around tariffs and trade policies could make it harder for India to acquire advanced technologies, scale up industries, and boost exports.