India's Economic Growth Expected To Reach 6.5 Pc In FY26: Crisil Report

(MENAFN- KNN India) New Delhi, Feb 6 (KNN) India's Economy is projected to grow at 6.5 percent in the financial year 2025-26, marginally higher than the 6.4 percent forecast for the current fiscal year, according to a new analysis by Crisil.

The financial services firm attributes this growth outlook to expected lower inflation rates and anticipated monetary policy easing by the Reserve bank of India, contingent upon stable global conditions and normal monsoon patterns.

The report emphasises the continuing significance of government expenditure as a primary growth catalyst, though its impact may diminish due to ongoing fiscal consolidation efforts.

A key element for maintaining economic momentum will be the acceleration of private sector investments, which requires substantial enhancement from current levels.

However, export growth faces potential constraints, particularly due to trade restrictions imposed by the United States.

Inflation projections show an encouraging trend, with Consumer Price Index (CPI) inflation expected to moderate from 4.7 percent in FY25 to 4.4 percent in FY26.

This decline is attributed to anticipated favourable monsoon conditions, a high base effect in food inflation, and moderated global commodity prices.

The possibility of inflation approaching the RBI's 4 percent target could create opportunities for additional rate cuts, potentially stimulating economic activity, although non-food inflation might experience a slight increase due to base effects.

The fiscal landscape shows promising developments, with the deficit projected to improve from 5.6 percent of GDP in FY24 to 4.8 percent in FY25, further declining to 4.4 percent in FY26.

This fiscal consolidation is expected to be achieved through strategic management of revenue expenditure while maintaining robust capital investment initiatives.

On the external economic front, Crisil forecasts a widening of the current account deficit from 1.0 percent of GDP in FY25 to 1.3 percent in FY26, primarily influenced by trade policy challenges with the United States.

However, strong performance in services trade, stable remittance flows, and favourable crude oil prices are expected to contain the deficit's expansion.

The Indian rupee is anticipated to see gradual depreciation, with average rates of Rs 86 per dollar in FY25 and Rs 87 per dollar in FY26, though geopolitical factors could introduce currency market volatility despite controlled current account deficits.

(KNN Bureau)

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