ICRA's 2025-26 Economic Forecast: Growth Slows Amid Evolving Challenges

ICRA projects India's GDP growth to dip to 6.2% in 2025-26, with real GVA growth at 6%. Inflation rates are predicted to exceed 3.5% for CPI and 1.8% for WPI. Despite upbeat rural demand and boosted household incomes, merchandise exports remain sluggish. Capital expenditure is forecast to rise.

Leading rating agency ICRA has projected a slowdown in India's economic growth for 2025-26, estimating the real GDP growth to settle at 6.2%, a drop from 6.5% in the previous financial year.

The report anticipates inflation rates to edge up, with Consumer Price Index (CPI) and Wholesale Price Index (WPI) expected to surpass 3.5% and 1.8% respectively. On the fiscal front, the fiscal deficit is forecast at 4.4% of GDP, while the current account deficit is projected between 1.2% to 1.3%.

Rural demand is likely to remain robust, supported by Rabi cash flows and high reservoir levels, according to ICRA. Moreover, income tax relief and reduced EMIs may boost household disposable incomes. However, while services exports are predicted to outpace merchandise exports, challenges persist with muted export outlooks and shifting trade policies.