Ind-Ra lowers India’s FY26 growth forecast to 6.3%

India’s economy will likely grow at a slower pace than earlier anticipated at 6.3 percent in FY26, India Ratings and Research noted in its mid-year outlook on July 23.

The ratings agency lowered its forecast for the year to 6.3 percent from 6.6 percent expected earlier, as it pointed that uncertainty is likely to keep growth contained.

“The headwinds are greater than tailwinds,” said Devendra Kumar Pant, chief economist, Ind-Ra.

On the consumption front, while Ind-Ra noted consumption to only taper off slightly to 6.9 percent from 7.2 percent in the previous fiscal, it pointed to rural consumption doing the heavy lifting, even as urban consumption remains a concern.

On the investment side as well, Ind-Ra said that public sector is expected to do better, as private investment remains in wait and watch mode.

Gross fixed capital formation, a proxy for investment, is to dip to 6.7 percent from 7.1 percent in the previous fiscal.

There is good news on the inflation front though, as Ind-Ra forecast average inflation dips to 3 percent for the year, compared with earlier expectations of inflation settling around 4 percent.

Ind-Ra expects inflation to hover below 3 percent for the remaining two quarters, before rising to 3.7 percent in the last quarter.

“Monetary easing in the current cycle likely to be limited to 150bps,” the rating agency said.
RBI’s Monetary Policy Committee will next meet in August to decide on the rate trajectory.

The central bank has already delivered 100 bps rate cut since February.

Ind-Ra’s revision comes just the day when Asian Development Bank lowered its forecast for FY26 to 6.5 percent compared with 6.7 percent projected earlier.

For FY27, ADB projects economy to grow 6.7 percent compared with 6.8 percent earlier.