Icra has revised India’s real gross domestic product (GDP) growth forecast for FY2026 to 6.5%, reflecting the positive impact of GST rationalisation and a strong Q1 economic performance, according to the rating agency’s September macroeconomic update.
Policy Measures Boost Growth Outlook
Icra’s Chief Economist, Aditi Nayar, highlighted that the recent Goods and Services Tax (GST) rate cuts, effective from September 22, 2025, are expected to moderate inflation and stimulate demand across multiple sectors. While the immediate effect on Consumer Price Index (CPI) inflation is likely to be modest, the long-term impact is anticipated to support sustained economic growth.
The agency also expects CPI inflation to ease to 1.8% in September 2025, with further moderation likely in October, driven by GST rationalisation and a high base effect from the previous year. Meanwhile, Wholesale Price Index (WPI) inflation is projected to rise slightly to around 0.9% in September, influenced by global commodity prices and currency fluctuations.
External and Fiscal Considerations
Despite the upbeat growth projections, Icra cautions that the current account deficit could exceed 1% of GDP, primarily due to elevated import bills and subdued export growth. Nevertheless, the country’s fiscal buffers remain intact, providing resilience against potential external shocks.
Nominal GDP and Monetary Outlook
Icra forecasts nominal GDP growth of 8.3% for FY2026. The rating agency also noted that the Reserve Bank of India (RBI) may consider a policy rate cut if inflationary pressures remain subdued and the economy continues to strengthen.
In summary: Icra’s revision underscores India’s resilient economic momentum, aided by policy measures and a strong start to the fiscal year. While external challenges persist, the outlook points to healthy growth supported by moderate inflation and continued fiscal stability.
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