India's GDP projected to grow 6.5% in FY26, 6.3% in FY25: ICRA

ICRA expects the country’s GDP to grow by 6.3 per cent in FY25.

Rural demand is expected to remain upbeat in FY26, aided by farm cash flows from the rabi harvest and an uptick in direct taxes.

The gross value added (GVA) at basic prices is expected to grow by 6.3 per cent in FY26 versus 6.3 per cent in FY25.

Nevertheless, the impact of sustained exchange rate depreciation on profitability of some corporations and headwinds related to tighter trade policies pose key downside risks to the outlook.

Overall, ICRA expects the agri GVA growth at 3.5-4 per cent in FY26. A well-distributed and normal monsoon remains key to support farm sentiments and incomes beyond the first half of this year, ICRA said in a note.

While urban consumption remained muted in FY25, the combination of income tax relief announced in the union budget FY26, rate cuts leading to lower equated monthly installments on loans and an expected moderation in food inflation is likely to boost household disposable incomes and discretionary consumption in FY26.

ICRA projects the wedge between the GDP and GVA growth to reverse to being positive in FY26.

ICRA expects external demand to remain subdued in FY26, owing to the risks of potential trade wars, redirection of trade flows, disruption of supply chains, as well as weakness in the US dollar-Indian rupee pair. This is likely to adversely impact India’s merchandise exports in FY26.

ALCHEMPro News Desk (DS)