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India to grow 6.6% in FY26, driven by investments, easing rates: Ind-Ra

The Indian economy has experienced a cyclical growth slowdown in the past three quarters, which it expects to reverse from the December quarter

Money, Loan, Economy, Capital
Ind-Ra expects the retail inflation in FY26 to average at 4.4 per cent, lower than FY25 forecast of 4.9 per cent | (Photo: Shutterstock)
Press Trust of India New Delhi
2 min read Last Updated : Dec 18 2024 | 5:08 PM IST

India Ratings and Research (Ind-Ra) on Wednesday projected the Indian economy to grow at 6.6 per cent in 2025-26, up from 6.4 per cent in the current fiscal year.

Ind-Ra believes investments will be a key growth driver for the Indian economy in FY26, like in FY22 and FY24.

The Indian economy has experienced a cyclical growth slowdown in the past three quarters, which it expects to reverse from the December quarter.

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 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, the agency said.

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"Nonetheless, the FY26 GDP growth is expected to be same as India's best decadal growth (FY11-FY20)," says Devendra Kumar Pant, Chief Economist and Head Public Finance, Ind-Ra.

Ind-Ra's said growth and inflation forecast could, however, be affected by any tariff war, and any capital outflow, if the dollar continues to strengthen.

Ind-Ra expects the retail inflation in FY26 to average at 4.4 per cent, lower than FY25 forecast of 4.9 per cent.

"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.

Merchandise trade account is expected to remain in deficit of USD 308 billion in FY26 (FY25: USD277.4 billion, FY24: USD 244.9 billion), Ind-Ra said.

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Topics :Indian EconomyIndia Ratings and ResearchInd-Ra

First Published: Dec 18 2024 | 5:05 PM IST

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