Strengthened Growth Outlook for FY26 

The economic growth outlook for India in the fiscal year 2025–26 has taken a positive  turn, With a 7% growth in GDP anticipated, according to an updated prediction from Crisil. This ratings and analytics firm has increased its projection by 50 basis points,  thanks to a more impressive than expected performance in the year’s first half. India  achieved an impressive 8 per cent growth in the initial six months, exceeding market  expectations and showcasing sustained momentum across vital sectors.  Consequently, Crisil has adjusted its GDP growth forecast from 6.5 per cent in FY25 to  7% in FY26, indicating a more optimistic macroeconomic landscape. 

Consumption-Driven Growth Amid External Challenges 

Crisil highlighted that domestic consumption will remain the key driver of growth,  bolstered by easing inflation, rationalisation of GST rates, and recent income tax relief  initiatives. Enhanced purchasing power and stable demand conditions are anticipated to benefit sectors like retail, services, and manufacturing. However, the agency also  pointed out potential external risks, particularly uncertainties surrounding US tariff  policies, which could affect India’s exports and investment inflows. Developments  regarding a potential India–US trade agreement will be closely observed, as they could  significantly influence external demand and mitigate downside risks.

GDP Momentum and Supportive Policies 

In the second quarter of FY26, India’s GDP growth increased from 7.8% in the previous  quarter to an 8.2% year-over-year six-quarter high. This growth was propelled by robust  consumption demand and the positive effects of GST rate Justification was put into  practice in September 2025. Nominal GDP growth saw a slight moderation to 8.7% from  8.8%, indicating stable price conditions alongside real growth. Reflecting this improving  outlook, the Reserve Bank of India (RBI) increased its full-year growth prediction. to  7.31%, indicating an increased revision of 50 basis points and reinforcing trust during  the expansion of the economy. 

Inflation Eases, Creating Policy Space 

On the inflation front, Crisil anticipates a significant decrease in consumer price  inflation (CPI) from 4.6% to 2.5% in FY26. This easing trend is attributed to a more  pronounced drop in food prices, robust agricultural output, softer global crude oil  prices, and the impact of GST rate reductions Retail inflation fell to an all-time low of  0.3% in October before marginally climbing to 0.71 per cent in November. Additionally,  the RBI lowered its estimate of CPI inflation for FY26 to 2.0 %.

Given this favorable inflation environment, Crisil believes there is potential for more monetary policy cuts,  although decisions will remain data-driven in light of global uncertainties. In December,  the Monetary Policy Committee lowered the repo rate by 25 basis points, making it 5.25  percent, with RBI Governor Sanjay Malhotra describing the current conditions as a rare  “Goldilocks period” characterised by strong growth and low inflation.