Crisil ups FY26 GDP forecast to 6.5%

New Delhi

Crisil has revised India’s GDP growth forecast for FY26 to 6.5%, driven by positive factors like expectations of an above-normal monsoon, potential rate cuts, and government support for rural areas. The India Meteorological Department expects the monsoon to be 106% of the long-period average, which could boost agricultural output and rural demand, leading to increased consumer spending.

Crisil also anticipates another rate cut this fiscal, which would further support domestic demand. So far, the Reserve Bank of India has cut rates by 100 basis points, encouraging banks to lower lending rates and improve liquidity.

Government spending has played a key role in investment growth. In May, central government capital expenditure rose by 38.7%, while 17 major states recorded a 44.7% increase. This led to a strong performance in investment-related goods, with infrastructure and construction goods output rising by 6.3%, compared to 4.7% earlier.

Private consumption is also expected to get a boost from income tax cuts and rural spending announced in the FY26 budget. However, the report warns of challenges ahead. Tariff hikes, especially reciprocal tariffs by the US from July 9, may impact India’s goods exports. Global uncertainty could also weigh on private investments.

Meanwhile, growth in the Index of Industrial Production (IIP) slowed to 1.2% in May from 2.6% in April, its weakest since August 2024. Declines in electricity, manufacturing, pharmaceuticals, chemicals, and textiles affected IIP, although investment-linked and some export-oriented sectors showed resilience.