New Delhi: India’s economic growth is expected to pick up pace in the current financial year, with GDP projected to grow at 7.4 per cent in FY2026, a new report said on Tuesday. This would mark an improvement from the estimated 6.5 per cent growth in FY2025, according to a report by ICRA Limited. The report said economic expansion may remain strong in the first half of FY2026, with GDP growth expected to be around 8 per cent.
However, growth is likely to ease to below 7 per cent in the second half as the impact of a favourable base effect fades. External challenges, especially weak exports, could also weigh on economic activity later in the year unless a trade deal with the United States is finalised. ICRA noted that economic activity remained healthy in the third quarter of FY2026, supported by a festive-season demand boost following GST rate cuts.
It added that mining, construction and electricity demand are expected to see a seasonal rise in the coming months after being affected by rainfall-related disruptions. At the same time, the slowdown in exports is expected to deepen in the second half of the fiscal, creating a drag on growth. Commenting on the outlook, Aditi Nayar said growth outcomes in 2025 turned out better than expected due to strong policy support.
She said income tax relief, GST rate rationalisation, cumulative policy rate cuts of 125 basis points and liquidity measures helped boost demand. "Growth outcomes have panned out better than expectations in 2025. This has benefitted from sizeable policy stimulus including income tax relief GST rate rationalisation 125 bps policy rate cuts and liquidity support,” Nayar explained. “Lower inflation eased pressure on household budgets, while an above-normal monsoon supported farm output,” she added. However, she cautioned that concerns on the external front remain and could impact growth in the near term if a trade agreement with the US does not materialise soon.
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