NEW DELHI: Rating agency Icra on Wednesday retained its projection for India’s GDP growth in FY2025-26 at 6.2 per cent, assuming well-distributed monsoons and average crude oil prices of around $70 per barrel.
However, the agency cautioned that risks to this outlook have increased, citing ongoing geopolitical tensions in West Asia, heightened financial market volatility, and uncertain global trade policies. These factors could weigh on GDP growth, Icra said in its Macro Update for June 2025.
In comparison, the Reserve Bank of India (RBI) has projected a slightly higher GDP growth rate of 6.5 per cent for FY2026.
“Economic activity has displayed a mixed trend in the first two months of FY2026, with only nine of the 17 non-agricultural indicators showing improvement over the fourth quarter of FY2025, even though summer crop output is estimated to grow at a healthy pace,” the report noted.
The early onset of the monsoon in May 2025 had a dampening effect on the electricity and mining sectors, it added.
On the consumption side, urban demand is expected to remain strong, supported by income tax relief measures, lower interest rates, and easing food inflation. However, global uncertainties, including unstable crude prices and unpredictable tariff regimes, are likely to act as headwinds to domestic economic momentum.
While maintaining its growth forecast at 6.2 per cent for the fiscal, Icra flagged a rise in downside risks.
CPI inflation
The report also projected that CPI inflation is likely to ease to 3.5 per cent in FY2026, down from 4.6 per cent in FY2025, aided by a favourable monsoon and declining food prices. This is lower than the Monetary Policy Committee’s forecast of 3.7 per cent for the year.
On the monetary policy front, Icra said the Reserve Bank may hold rates steady in August 2025, but a final 25 basis points rate cut could be on the table in October, based on the current subdued growth-inflation outlook.
Highlighting the vulnerability of India’s external balance to oil price shocks, the report warned that a $10 per barrel increase in average crude prices could raise net oil imports by $13–14 billion, widening the current account deficit by 0.3 per cent of GDP.
A sustained spike in oil prices could also dent corporate profitability and prompt a downward revision in the growth estimate.
