Daijiworld Media Network - New Delhi

New Delhi, Sep 12: India’s economy is projected to grow at a stable rate of 6.5% in FY26, according to a new report by Crisil, though the outlook is tempered by external uncertainties and sluggish export performance.

The report highlights export weakness as a potential drag on growth, citing the 50% tariffs currently imposed by the United States on Indian goods. Despite these external pressures, domestic demand is expected to receive a lift from a combination of factors — including anticipated interest rate cuts, a normal monsoon season, easing inflation, and potential tax relief measures.

Crisil notes that recent and upcoming monetary policy actions — including a 100-basis-point cut in the Cash Reserve Ratio (CRR) expected between September and December, along with prior repo rate cuts — will help ease financial conditions and support growth.

However, the report warns of capital flow volatility amid global financial instability, which could keep the rupee under pressure in the short term.

Inflation Trends and RBI Outlook

Crisil expects the RBI’s Monetary Policy Committee (MPC) to deliver one more rate cut this fiscal, citing a favorable inflation trajectory.

Inflation has remained below the RBI’s 4% target for six consecutive months (February to July), driven by strong agricultural output and softening food and commodity prices.

As of August 29, kharif sowing was up 2.9% year-on-year, indicating robust crop coverage. However, there are concerns that excess rainfall could impact yields in some areas. Overall, lower commodity prices, subdued food inflation, and reduced GST rates are expected to help keep inflation in check for the rest of the fiscal year.

Credit Growth and Lending Trends

Bank credit growth showed modest improvement in August, rising to 10% year-on-year, up from 9.8% in July and an average of 9.6% in the June quarter. Sector-wise data until July reflects stronger lending in:

• Services: 10.6% (vs 9% in June)
• Agriculture: 7.3% (vs 6.8%)
• Industry: 6% (vs 5.5%)

Personal loan growth remained largely stable at 11.9%, compared to 12.1% in the previous month.

The one-year Marginal Cost of Funds-Based Lending Rate (MCLR) — a key benchmark for bank loans — eased 15 basis points to 8.6%, mirroring the RBI’s 100-bps policy rate cut between February and June 2025.

Summary

Despite global trade tensions and uncertainties around capital flows, India’s domestic growth drivers — including monetary easing, healthy agriculture, and resilient consumption — are expected to keep GDP growth steady at 6.5% in FY26. However, policy agility and inflation management will be critical in navigating the evolving economic landscape.