India’s real GDP growth is forecasted to reach 7.4% for the financial year 2026, up from 6.5% in FY25, as per a report by ICRA. The report highlights a seasonal increase in electricity, mining, and construction sectors contributing to this growth.
The growth is anticipated to dip below 7% in the second half of FY26 from 8% in the first half due to unfavorable base effects and a decline in exports. The report suggests a potential halt in the RBI’s policy review in February 2026, with future decisions influenced by the FY27 Union Budget and evolving inflation-growth dynamics.
Economic activity in the third quarter of FY26 remained robust, supported by festive demand triggered by GST rate cuts and seasonal improvements in certain sectors. Consumption volumes of goods and services, along with manufacturing volumes, are expected to have seen positive impacts from GST reductions and festive demand in Q3.
ICRA predicts a drop in CPI inflation to 2% in FY26 from 4.6% in FY25, with WPI at 0.4%. In November 2025, CPI rose to 0.7% from 0.3% in October, primarily due to reduced deflation in food and beverages. Moreover, mining and construction activities, as well as electricity demand, are set to rise in the upcoming months after experiencing easing due to disruptions related to rainfall.
The report also mentions specific growth forecasts, such as a 6.5–7.5% increase in cement production for FY26, a potential moderation in steel demand growth to 7–8%, and a subdued 1.5–2% growth in electricity demand for the same fiscal year. External risks highlighted include delays in the US-India trade deal and global policy changes impacting service exports, while domestic risks involve sluggish export growth, monsoon variability, fiscal limitations, and inflationary pressures from commodity prices.
