India's GDP Growth Expected to Exceed 6.2% in FY2025-26: ICRA

Credit rating agency ICRA has projected India’s real GDP growth for the financial year 2025-26 to be above 6.2%, slightly lower than the 6.5% recorded in FY2024-25.

In its latest outlook, the agency estimates that the country's real Gross Value Added (GVA) growth rate will be more than 6.4% during the same period. While GDP reflects the total value of goods and services produced within a country, GVA deducts the cost of intermediate goods and services to determine the net value added.

Inflation and Fiscal Outlook

The report forecasts CPI-based inflation to stay above 3.5%, while WPI inflation is expected to remain over 1.8% during the fiscal year.

ICRA estimates the fiscal deficit for FY2025-26 to be around 4.4% of GDP, and the current account deficit to range between 1.2% and 1.3%.

Rural Demand and Consumer Spending

According to ICRA, rural demand is likely to remain strong due to better rabi crop output and higher-than-normal reservoir levels.

The report also expects the upcoming Union Budget for 2025-26 to potentially provide major income tax relief. Along with interest rate cuts and easing food inflation, this may boost household disposable income and consumer spending.

Trade and Investment Projections

Despite these positives, merchandise exports may remain sluggish in the near term. However, ICRA expects services exports to outpace goods exports.

The report predicts that the central government’s capital expenditure will grow by 10.1% in FY2025-26, which is likely to boost investment activity. Nevertheless, weak export prospects and uncertainty in trade policies may limit private capital expenditure growth.