While US tariff hikes remain a key risk to growth forecast, global credit rating agency Crisil on Monday projected 6.5 per cent GDP growth for India in fiscal 2026, with risks tilted to the downside.

Crisil expects the RBI’s monetary easing to create some offset to the external headwinds.

“Interest rate cuts, income tax relief and easing inflation are expected to provide tailwinds to consumption this fiscal, while the expected normal monsoon will support agricultural incomes,” the report mentioned.

Moreover, the anticipated decline in global crude oil prices, resulting from a potential global slowdown, is expected to provide additional support to domestic growth, it added.

That being said, US tariff hikes are a key risk to Crisil’s GDP growth forecast for fiscal 2026, as uncertainty about the duration and frequent changes in tariffs could hinder investments.

In FY25, improved growth in capital, infrastructure and construction goods’ output in the second half points at a gradual pick-up in construction/capital expenditure activity in the latter part of the fiscal.

Finally, other high-frequency indicators show growth prospects improving in the fourth quarter.

The latest RBI 'Quarterly Industrial Outlook’ survey shows a sequential strengthening in demand in the fourth quarter (Q4 FY25).

“The latest RBI Consumer Confidence Survey indicates an improvement in March, in both rural and urban areas. All these factors corroborate the recovery in domestic demand. Healthy rabi output and easing inflation in the fourth quarter also bode well for consumption demand,” the report mentioned.

Industrial growth, as measured by the Index of Industrial Production (IIP), slowed to 2.9 per cent in February from 5.2 per cent in January (revised up from 5.0 per cent), driven by lower output growth in the mining and manufacturing sectors, while electricity recorded an uptick.

“On average, IIP growth stood at 4.0 per cent in the fourth quarter as of February, broadly in line with the 4.1 per cent recorded in the December quarter,” said Crisil.

With data now available for eleven months of FY25, the underlying momentum within sub-sectors IIP can be highlighted. The IIP manufacturing performed better on average in the second half of fiscal 2025. This lifted growth in segments like petroleum products, machinery and textiles during the second half.