India’s economic outlook for the current financial year has improved, with Crisil Limited revising its GDP growth forecast to 7 per cent, up from its earlier estimate of 6.5 per cent. The upgrade comes after the economy posted a robust 8 per cent growth in the first half of FY26, driven by strong private consumption, manufacturing and services activity.
Dharmakirti Joshi, Chief Economist at Crisil Limited, said India’s real GDP growth of 8.2 per cent in the second quarter exceeded expectations, even though nominal GDP growth was moderate at 8.7 per cent. He noted that the gap between real and nominal GDP is now the smallest since the third quarter of FY2020.
According to him, private consumption played a key role in boosting real growth. “Manufacturing and services sectors also showed significant improvement from the supply side,” Joshi said. “A favourable statistical base — since the economy grew only 5.6 per cent in the same quarter last year — also supported higher growth numbers,” he added.
A lower deflator, helped by easing inflation, gave an additional lift. Both CPI and WPI inflation were lower in the second quarter compared to the first, which boosted discretionary spending due to reduced food inflation.
Joshi said the third quarter is also expected to benefit from these positive factors. While government investment is likely to stabilise, early signs of a pickup in private investment are emerging. He added that the reduction and rationalisation of GST rates is encouraging private consumption, along with cuts in income tax and interest rates.
The interest rate reduction follows repo rate cuts by the Reserve Bank of India’s Monetary Policy Committee earlier this year. Based on these trends, Crisil now expects a growth rate of 7 per cent for FY26. This projection factors in a softer second half, where GDP growth is expected to slow to 6.1 per cent due to the impact of higher US tariffs and normalisation of government capital expenditure.
However, Joshi cautioned that slow nominal GDP growth — driven by a sharp fall in inflation — poses risks.
