India’s economic landscape for the 2025-26 financial year is looking robust, with leading ratings agency ICRA projecting significant growth and providing insights into key indicators.
Thank you for reading this post, don't forget to subscribe!Key Economic Projections for FY2025-26
ICRA forecasts India’s real GDP growth to exceed 6.5%, a strong indicator of the nation’s economic momentum. Complementing this, real Gross Value Added (GVA) growth is expected to surpass 6.3%. It’s helpful to remember that while GDP measures the total value of all goods and services produced, GVA focuses on the value added at each stage of production, giving a clearer picture of sectoral contributions.
Inflation and Fiscal Health
On the inflation front, the Consumer Price Index (CPI) is anticipated to be above 4.2%, with the Wholesale Price Index (WPI) projected to exceed 2.7% for the current fiscal year.
ICRA also provides a positive outlook on India’s fiscal health, forecasting the fiscal deficit at 4.4% of GDP. The current account deficit (CAD) is projected at a manageable -1%.
Driving Forces Behind Growth
Several factors are expected to fuel this optimistic outlook:
- Robust Rural Demand: Aided by strong Rabi cash flows and above-normal reservoir levels, rural demand is set to remain buoyant.
- Boost to Household Incomes: Disposable incomes are expected to rise due to significant income tax relief in the 2025-26 Union budget, potential rate cuts leading to lower EMIs, and a moderation in food inflation.
- Government Capital Expenditure: A planned 10.1% increase in the Centre’s capital expenditure for 2025-26 is poised to significantly boost investment activity.
- Services Exports Outperforming: While merchandise exports are expected to remain subdued, services exports are likely to show stronger growth, contributing positively to the economy.
Despite a muted outlook for exports and uncertainty surrounding trade policies, ICRA suggests that private capital expenditure might also gain some traction.
This comprehensive outlook from ICRA paints a promising picture for India’s economic performance in the upcoming financial year, driven by a blend of strong domestic demand and strategic government spending.
