India is anticipated to witness an economic growth spurt in the current financial year, with the GDP forecasted to expand by 7.4% in FY2026, as per a report by ICRA Limited. This projection signifies an improvement from the 6.5% growth estimated in FY2025. The report suggests that the economic expansion is likely to be robust in the first half of FY2026, with GDP growth hovering around 8%.
In contrast, the growth pace is expected to moderate to below 7% in the latter half of the year as the impact of a favorable base effect diminishes. Potential external challenges, particularly subdued exports, could exert pressure on economic activity later in the year unless a trade deal with the United States materializes. ICRA highlighted that economic activity remained vigorous in the third quarter of FY2026, supported by a surge in demand during the festive season following GST rate reductions.
Furthermore, the report anticipates a seasonal upsurge in mining, construction, and electricity demand in the upcoming months after facing disruptions due to rainfall. However, the report also warns that the slowdown in exports is likely to intensify in the latter part of the fiscal year, acting as a hindrance to growth. Aditi Nayar, commenting on the outlook, attributed the better-than-expected growth outcomes in 2025 to robust policy support measures.
Nayar highlighted that various policy interventions such as income tax relief, GST rate rationalization, cumulative policy rate cuts of 125 basis points, and liquidity injections played a pivotal role in stimulating demand. She emphasized that the growth performance in 2025 surpassed expectations, benefiting from substantial policy stimuli and favorable factors like lower inflation and enhanced farm output due to a favorable monsoon. However, Nayar cautioned that concerns persist on the external front and could impede growth in the short term if a trade agreement with the US is not reached promptly.
