India’s economy is expected to grow at 6.5% in the 2025-26 fiscal year, keeping it among the fastest-growing major economies in the world, according to a recent Crisil report released on March 3, 2025. The report attributes this steady growth to factors such as a normal monsoon, stable commodity prices, and rising private consumption.
Strong Private Consumption to Drive Growth
One of the key reasons for India’s economic momentum is strong consumer spending. A normal monsoon is expected to boost agricultural output, keeping food inflation low and leaving households with more money to spend on things like shopping, travel, and entertainment.
The Union Budget 2025-26 also plays a role in this, offering tax benefits and increased spending on job-creation programs, which should further support demand. Additionally, the Reserve Bank of India (RBI) is expected to ease monetary policy, making loans cheaper and encouraging more borrowing and spending.
Private Investment Holds the Key
While consumer demand looks strong, the growth of investments will depend largely on private companies increasing their capital expenditure (Capex). The government is planning to reduce its own infrastructure spending to manage the fiscal deficit, putting pressure on private businesses to step up and invest.
RBI Expected to Cut Interest Rates
The Crisil report predicts that the RBI may cut the repo rate by 50-75 basis points in 2025-26. This would make borrowing cheaper and provide a boost to businesses and consumers alike. The central bank has already taken steps to improve liquidity and ease lending rules for non-banking financial companies (NBFCs), which should help make credit more accessible.
Global Trade Risks Remain a Concern
Despite a positive domestic outlook, there are some concerns on the global trade front. Ongoing trade tensions, particularly the US-led tariff war, could hurt India’s exports if countries impose new restrictions. On the other hand, imports are expected to stay strong due to robust domestic demand.
A potential increase in Chinese imports could also disrupt India’s trade balance as global supply chains shift. This could make it harder for local businesses to compete.
Review of 2024-25 Performance
For the current fiscal year (2024-25), India’s GDP is also projected to grow by 6.5%, though this is a slowdown from 9.2% in the previous year.
However, growth picked up in the third quarter, reaching 6.2%, with agriculture (5.6%) and services (7.4%) leading the way. Private consumption grew by 6.9%, driven by festive season shopping and wedding expenditures. Government spending also increased by 8.3%, while exports surged by 10.4%, thanks to strong service sector performance.
Manufacturing has shown steady improvement, with the Index of Industrial Production (IIP) reflecting gains in infrastructure, construction, and consumer goods. The report expects fourth-quarter GDP growth to hit 7.6%, keeping the full-year estimate at 6.5%.
What’s Ahead for India’s Economy?
Looking forward, India’s economic growth remains on a strong footing, driven by agriculture, consumer demand, and expected policy support. However, risks from global trade challenges and the need for private investment could impact the growth path.
For now, India is set to maintain steady economic momentum in 2025-26, balancing domestic strength with external challenges.
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[…] CRISIL projects India’s economy to grow at 6.5% in 2025-26, maintaining its position as one of the fastest-growing major economies. This growth will be supported by an easing monetary policy, government efforts to boost private consumption, and a 10.1% rise in capital expenditure (capex) as announced in the Union Budget. […]