India To Clock 6.2% GDP Growth In FY26; Inflation Seen Easing To 4%: Report
India’s economy is forecast to maintain stable momentum in FY26, with GDP projected to expand by 6.2 per cent, according to a report released on Friday by CareEdge Ratings. The report also estimates Consumer Price Index (CPI) inflation to average around 4.0 per cent during the year. However, it noted that further rate cuts by the Reserve Bank of India (RBI) are unlikely unless the economy faces unexpected growth shocks.
On the fiscal front, the rating agency expects India’s fiscal deficit to be around 4.4 per cent of GDP in FY26. The current account deficit (CAD) is likely to narrow slightly to 0.9 per cent, from 1.0 per cent in FY25, reflecting a manageable external position despite global uncertainties.
CareEdge projects the 10-year government bond yield to stay in the 6.0 per cent to 6.2 per cent range by the end of FY26, indicating stable borrowing costs. The USD-INR exchange rate is forecast to hover between 85 and 87, reflecting a moderately depreciating trend in the rupee, possibly influenced by global economic developments and oil price movements.
RBI Policy And Liquidity Measures
The RBI, in its recent Monetary Policy Committee (MPC) review, reiterated its commitment to supporting growth as inflation pressures ease. A phased reduction of the Cash Reserve Ratio (CRR) by 100 basis points, beginning September, is expected to inject around Rs 2.5 lakh crore of long-term liquidity into the banking system by the end of 2025.
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Crude Prices And Geopolitical Risks
Crude oil prices experienced a sharp upswing in June, reaching nearly $79 per barrel—the highest since January—amid geopolitical tensions in the Middle East. However, prices later corrected by 14 per cent as tensions eased. Assuming no further escalation, Brent crude is expected to average between $65 and $70 per barrel in FY26, posing no immediate threat to India’s macroeconomic outlook.
Oil Imports
India's diversified crude oil sourcing is helping shield the economy from regional volatility. The share of Middle Eastern countries in India's oil imports has decreased to 50 per cent in FY25, down from 60 per cent a decade ago. Meanwhile, imports from Russia have increased dramatically, reaching 28.5 per cent in FY25 from a mere 0.2 per cent in FY15. Iran’s contribution has dwindled to just 0.1 per cent, as per data by import quantity.
The report concludes that while global headwinds such as Middle East conflicts remain a key risk factor, India’s broad-based energy sourcing strategy and strong domestic fundamentals offer a buffer against external shocks.
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