Crisil expects FY26 GDP growth at 6.5% as private consumption remains primary driver

Crisil expects India’s GDP growth to be at 6.5% for the fiscal year 2026, with a possible downside risks on the back of global uncertainties. The S&P Global subsidiary anticipates exports growth to be impacted due to the imposition of 50% tariffs by the U.S. from August.

Labour-intensive industries and private investment delays may follow from the U.S. tariffs pressure and global growth slowdown.

“The downside risks: Export growth is expected to be a drag on GDP growth in the coming quarters following the imposition of 50% tariffs on India by the US from August. Certain labour-intensive sectors are particularly vulnerable. Slowing global growth may put further pressure on export growth. Global growth is expected to slow down to 2.9% in 2025 from 3.3% in 2024 according to S&P Global. Plus, the elevated uncertainty could hinder private investments as business decisions may be delayed,” Crisil wrote in its note.

Despite the global headwinds, the credit rating agency expects private consumption to be the key contributor to GDP growth.

Healthy monsoon is one of the reasons for this, that will improve kharif sowing and rural incomes. Further, a robust agricultural production will keep the food inflation in check.

“Robust agricultural production on the back of the favourable monsoon will help keep food inflation in check, allowing for space in household budgets for discretionary spending. Inflation has already eased significantly to 2.4% so far, this fiscal (April-July average) compared with 4.6% in the last fiscal,” the agency said.

Private side demand push is also set to be seen because of the favourable monetary and fiscal policy support. This includes the 100-basis points rate cut since the beginning of this year with two consecutive 25 basis points cut in the repo rate in February and April Monetary Policy Committee, followed by June decision of slashing rate by 50 basis points.

“[Additionally,] a cut in the cash reserve ratio (CRR, to be carried out in four tranches between September and December) [is] expected to support consumption in the urban segment. Transmission of rate cuts to bank lending and deposit rates is going on,” the note added.

Similarly, the no-tax relief for income up to ₹12 lakh and increased spending on rural schemes is set to further private expenditure.

“The proposed change in the Goods and Services Tax structure, which may reduce the tax in some consumer segments, could also support growth this fiscal, depending on when the proposed changes come into effect. However, it is too early to assess the impact as this as the changes are yet to be finalised,” the note added.