A new Crisil report has projected India’s gross domestic product (GDP) growth to remain steady at 6.5 per cent in FY26, with some downside risks owing to external factors.

Export growth is expected to be a drag on GDP growth, given the imposition of 50 per cent tariffs on India by the US at present. However, consumption will get a boost from rate cuts, healthy rains, soft inflation and tax relief, the report mentioned.

The repo rate cuts and 100-bps cut in the cash reserve ratio (to be implemented between September and December) could provide some cushion to financial conditions this fiscal.

“That said, there may be volatility in capital flows, given the global turmoil, which may keep the rupee under pressure in the short term,” the report added.

Crisil expects the RBI Monetary Policy Committee (MPC) to cut policy rates one more time this fiscal, given expectations of soft inflation and downside risks to growth.

“Inflation has remained below the RBI’s target of 4 per cent for the past six months (February-July). Healthy agricultural production is expected to keep food inflation subdued. As on August 29, kharif sowing was up a healthy 2.9 per cent on-year,” the report noted.

However, some crop yields may come under pressure due to excess rain. Soft commodity prices will mean softer non-food inflation. Lower GST rates are also likely to add a downside to inflation this fiscal, it mentioned.

Bank credit growth rose to 10 per cent on-year in August from 9.8 per cent in July and 9.6 per cent average in the quarter ended June.

Sectoral data until July indicates improved credit in services (10.6 per cent in July vs 9 per cent in June), agriculture (7.3 per cent vs 6.8 per cent) and industry (6 per cent vs 5.5 per cent).

That said, growth in personal loans was broadly stable (11.9 per cent vs 12.1 per cent).

The one-year marginal cost of funds-based lending rate (MCLR) – a benchmark for several bank lending rates – eased 15 bps to 8.6 per cent. The reduction reflected the lagged response to the 100-bps rate cut by the RBI’s Monetary Policy Committee (MPC) between February and June 2025.