India May See 6.5% GDP Growth as Inflation Eases: Report Global crude oil prices, which declined from around USD 75 per barrel to the USD 60–65 range by mid-April, are expected to remain stable during FY26. This fall could ease inflationary pressures and support India's economic growth.
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India may be able to sustain real GDP growth of around 6.5 per cent in FY26 while maintaining CPI inflation below 4 per cent, supported by falling crude oil prices and suitable policy measures, according to EY's latest Economic Watch report.
Global crude oil prices, which declined from around USD 75 per barrel to the USD 60–65 range by mid-April, are expected to remain stable during FY26. This fall could ease inflationary pressures and support India's economic growth, said D.K. Srivastava, Chief Policy Advisor, EY India. Owing to waning favourable base effects, inflation in the fuel and light segment turned positive at 1.5 per cent in March 2025 after remaining consistently negative since August 2023.
EY's report also highlights the need for tactical shifts in trade policy, such as increasing crude oil imports from the US to narrow the trade deficit and offset the impact of recent reciprocal tariffs announced by Washington. A comprehensive trade agreement between India and the US, expected by September–October 2025, could further strengthen economic ties and bring greater clarity to bilateral trade dynamics.
On April 2, 2025, the US announced a comprehensive list of reciprocal tariff rates for all countries with which it maintains international trade. However, these rates have been put on hold for 90 days and replaced by a uniform 10 per cent tariff for all countries except China.
"In its April 2025 release of the World Economic Outlook, the International Monetary Fund has projected India's FY26 growth at 6.2 per cent despite considerable global uncertainty. Further, after showing a growth of 6.3 per cent in FY27, in the medium term, India is projected to grow at 6.5 per cent. In any case, India's real GDP growth is likely to be driven largely by domestic growth drivers. The share of India's merchandise exports to the US in India's GDP averaged 2.3 per cent during FY22- 24. Any global economic slowdown may have some adverse impact on India's overall exports of goods and services, which had a share of 22 per cent in its GDP, on average, during the period FY22-24. However, alongside, goods imports to India may also go down, thereby limiting the negative impact on net exports," Srivastava said. He said an improvement in private investment with lower interest rates may neutralize these effects.
To ensure GDP growth remains close to its potential rate of 6.5 per cent, the report stressed the need for a combination of fiscal and monetary support. On the monetary side, the interest rate reduction cycle has already begun and may continue until policy rates drop to 5–5.25 per cent. Fiscal policy must continue the path of reducing the fiscal deficit-to-GDP ratio toward sustainable levels while maintaining a growth-friendly composition, the report said.
The report further identifies four key interlinked effects for India on account of global trade tensions. This includes reduced exports, a global growth slowdown, falling crude oil prices, and the impact of global excess production capacities.
"India's response to these global disruptions must be strategic and multi-pronged. We see the potential for India to emerge relatively stronger, provided it continues to manage its macroeconomic fundamentals well through a growth-oriented fiscal policy and accommodative monetary stance," Srivastava said.
