Economic Outlook FY26.
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We maintain our FY25 GDP growth forecast of 6.4% and expect GDP growth in FY26 to lie in the 6.3-6.7% range with rural consumption expected to be on a gradual mend and urban consumption remaining on a weaker turf. A broad based private capex revival may remain elusive with heightened global uncertainty and uneven domestic consumption seen weighing. Exports especially services exports offer a bright spot. FY26 outlook to be governed by innumerable swing factors: Trump tariffs, GST 2.0, Climate change, Fiscal consolidation and debt management, and Proliferation of AI. On inflation we revise our FY25 forecast up by 20 bps to 4.9%. Expecting improved agri prospects, we project a deceleration in CPI inflation around 4.2-4.5% in FY26. On external sector, we revised our FY25 CAD and BoP forecast to 1.3% of GDP and USD 5 bn from 1.2% and USD 30 bn earlier respectively. We project FY26 CAD and BoP at 1.3% of GDP and USD 3 bn. We revised our USDINR forecast for Mar-25 to 86.50 and introduce our Mar-26 forecast at 89.50. Amidst a buildup of near-term depreciation pressure for INR and upward revision in our inflation outlook, we roll over our first rate cut call to Apr-25 from Feb-25 earlier. We expect the RBI to infuse durable liquidity to avoid incremental credit tightening and look for Rs 3 tn OMO purchases by end of FY26. We maintain our 10Y g-sec yield call of 6.50% for Mar-25 and look for further moderation towards 6.25% by Mar-26