New Delhi

India’s economy is expected to expand at 7 per cent in the current fiscal year 2025–26, according to Crisil, which has raised its growth forecast by 50 basis points following stronger-than-anticipated performance in the first half of the year.

The upward revision comes after India posted a robust 8 per cent growth in the first half, exceeding market expectations. In its latest assessment, the ratings and analytics firm said GDP growth is projected to improve from 6.5 per cent in fiscal 2024–25 to 7 per cent in fiscal 2025–26.

Crisil noted that domestic consumption is likely to remain the primary driver of growth, supported by low inflation, GST rate rationalisation and income tax relief measures. However, it cautioned that US tariff-related developments could pose risks to exports and investment flows, although progress on a potential India–US trade agreement will be closely watched.

India’s GDP growth accelerated to a six-quarter high of 8.2 per cent year-on-year in the second quarter of fiscal 2025–26, compared to 7.8 per cent in the previous quarter, aided by strong consumption demand and the impact of the GST rate rationalisation exercise implemented in September 2025. Meanwhile, nominal GDP growth moderated slightly to 8.7 per cent from 8.8 per cent.

Reflecting the improving outlook, the Reserve Bank of India (RBI) raised its full-year growth projection to 7.3 per cent, an increase of 50 basis points.

On the inflation front, Crisil expects consumer price inflation to ease sharply to 2.5 per cent in fiscal 2025–26, down from 4.6 per cent in the previous year. It attributed the decline to a sharper-than-anticipated fall in food prices, healthy agricultural output, softer global crude oil prices and the benefits of GST rate cuts.

Retail inflation fell to 0.3 per cent in October, the lowest level in the current CPI series, from 1.4 per cent in September, before inching up marginally to 0.71 per cent in November, according to provisional data.

The RBI has also revised its CPI inflation forecast for 2025–26 to 2.0 per cent, down from an earlier estimate of 2.6 per cent.

Given the benign inflation environment, Crisil said the central bank’s monetary policy remains open to further rate cuts, though decisions are expected to remain data-dependent amid global uncertainties. The Monetary Policy Committee (MPC) cut the policy rate by 25 basis points in its December meeting while maintaining a neutral stance.

RBI Governor Sanjay Malhotra described the current macroeconomic conditions as a “rare goldilocks period”, marked by strong growth alongside unusually low inflation. Following the latest policy review, the repo rate now stands at 5.25 per cent.

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On crude oil, Crisil projected prices to average USD 60–65 per barrel in calendar year 2026, compared to USD 65–70 per barrel in 2025. Brent crude averaged USD 63.6 per barrel in November, down 1.6 per cent month-on-month and 14.5 per cent year-on-year.