Nation Growth Concept, Green Up Arrows – Businessman Holding Card of India Flag
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Economists and research agencies estimate a deeper correction in growth than the Monetary Policy Committee (MPC), which has cut growth estimates for FY26 by 20 basis points to 6.5 per cent. Most economists believe growth could be much lower between 5.9-6.3 per cent. Nomura has already cut the forecast to 5.8 per cent.
RBI’s latest forecast is nearer the median 6.55 per cent of growth range (6.3-6.8 per cent) estimated by the Economic Survey. However, economists and agencies predict growth to be close to the lower mark of the survey range.
Global uncertainties
According to Rumki Majumdar, economist with Deloitte, India will likely tide over global uncertainties relatively better even as there is a downside risk to GDP. Specifically, trade uncertainties could potentially reduce growth by 0.2-0.3 per cent.
“We believe, the tax stimulus will significantly boost consumption, creating a multiplier effect that could raise GDP by 0.6-0.7 per cent this fiscal year, partially offsetting the trade impact. Today’s policy rate cut will also add to the resilience in domestic demand even as global demand may slow due to trade disruptions,” she said.
Crisil’s Chief Economist Dharmakirti Joshi said given the numerous moving parts, forecasts are now less reliable. “In our base case, we project India to grow at 6.5 per cent with risks tilted to the downside and inflation rate of 4.3 per cent in fiscal 2026,” he said.
Downside risks
The downside risks to growth come from rising uncertainty, which impairs decision making, and the impact of tariffs and slowing global growth on exports, he added.
A report by Upasana Chachra, Chief India Economist and Bani Gambhir Economist at Morgan Stanley, said that while the RBI remains constructive on India‘s domestic demand, external headwinds have exacerbated downside risks. “We see downside risk of 30-60bps to our GDP estimate of 6.5 per cent YoY, led primarily by the second order impact of a dent on investor confidence and capex cycle,” it said.
Economists at HDFC Bank are more cautious.
“We now expect GDP growth at 6.3 per cent for FY26 assuming that there is some retraction in current tariff announcements with successful bilateral negotiations and a deep global recession is avoided. If not, GDP growth could be lower,” a report by HDFC economists said.
In its latest report titled ‘Asia Insight – India: A lower RBI Terminal rate of 5%’, Nomura called RBI’s forecasts as “optimistic”, despite the downgrade. Even before Trump’s reciprocal tariffs, domestic growth drags included weak urban consumption, uneven rural recovery, tepid private capex, household balance sheet stress and the negative credit impulse.
“There are opportunities for India from trade diversion and medium-term supply chain shifts, but we expect higher tariffs, uncertainty and negative wealth effects to further weigh on exports, investment and consumer discretionary demand this year,” it said. Accordingly, it has downgraded 2025 GDP growth forecast to 5.9 per cent (from 6 per cent) and FY26 to 5.8 per cent (from 6 per cent).
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Published on April 9, 2025
