Crisil Raises India’s FY26 GDP Growth Forecast to 7%

Credit rating agency Crisil has raised its growth forecast for the Indian economy, projecting a GDP growth rate of 7 per cent for the financial year 2025–26. The upward revision reflects stronger-than-expected economic performance in the first half of the current fiscal year and improving macroeconomic conditions.

Crisil increased its forecast by 50 basis points after India recorded around 8 per cent growth during the first six months of FY26, significantly outperforming earlier estimates. According to the agency, GDP growth in the July–September quarter of FY26 rose to 8.2 per cent, the highest level in six quarters, supported by robust domestic demand and policy measures.

The agency identified domestic consumption as the primary driver of growth, aided by easing inflation that has boosted household spending. Supportive factors such as GST rate rationalisation, income tax relief, and stable financial conditions have further strengthened demand. On the supply side, manufacturing and services activity showed steady improvement, contributing to overall economic momentum.

While the outlook remains positive, Crisil cautioned that external risks could moderate growth in the latter half of FY26. It warned that higher tariffs imposed by the United States may impact Indian exports and investment flows, adding that the progress of the India–US trade agreement will be an important factor to watch in the coming months.

Reflecting similar optimism, the Reserve Bank of India has raised its full-year GDP growth projection for FY26 to 7.3 per cent. At its December policy meeting, the RBI cut the repo rate by 25 basis points to 5.25 per cent, citing strong growth prospects and a sharp decline in inflation. RBI Governor Sanjay Malhotra described the current economic environment as a rare “Goldilocks phase,” marked by high growth and very low inflation occurring simultaneously.

On the inflation front, Crisil projected that CPI-based retail inflation will average around 2.5 per cent in FY26, down sharply from 4.6 per cent in FY25. The decline has been driven by lower food prices, improved agricultural output, and falling global crude oil prices. Retail inflation touched a record low in October before inching up slightly in November, remaining well below the RBI’s tolerance band.

Crisil also expects global crude oil prices to remain subdued, averaging between 60 and 65 dollars per barrel in FY26, compared to 65–70 dollars per barrel in the previous year. The moderation in energy prices is expected to support price stability and help sustain India’s growth momentum over the medium term.