Economic Growth Forecasts Amid Stable Inflation Trends

A recent report highlights India's economic growth forecasts, projecting a 7% GDP growth for FY27 despite rising inflation. Factors such as stable global crude prices and GST rate cuts are expected to mitigate inflationary pressures. The Reserve Bank of India's recent repo rate cut aims to stimulate growth, while favorable agricultural conditions promise moderate food prices. The Indian economy's impressive growth of 8.2% in Q2 FY26 reflects strong industrial and service sector performance, supported by policy measures that enhance consumption demand. This article delves into the intricate dynamics of India's economic landscape.

By Narendra Chaudhary Dec 6, 2025, 16:43 IST

Economic Outlook for FY27

New Delhi, Dec 6: A recent report indicates that while average inflation is expected to increase in FY27, the rise will be constrained by stable global crude oil prices, the positive effects of GST rate reductions, and limited price pressures due to excess capacity in China.

The report from Care Edge Ratings maintains a growth forecast of 7.5% for FY26, attributing the current growth momentum to reductions in income tax, rationalization of GST rates, and lower interest rates.

Despite ongoing global uncertainties, GDP growth is projected at 7% for FY27. The Reserve Bank of India's recent unanimous decision to cut the repo rate by 25 basis points to 5.25% is expected to leverage low inflation to boost economic growth.

Additionally, the liquidity measures announced for December highlight the central bank's commitment to ensuring favorable liquidity conditions for effective policy implementation.

With inflation easing and a positive outlook for food prices, the RBI has adjusted its full-year inflation forecast for FY26 down to 2% from a previous estimate of 2.6%, aligning closely with the report's prediction of 2.1%.

The report anticipates a moderation in growth momentum during the second half of FY26 as the benefits from export front-loading, festive season consumption, and a low base diminish.

On the food inflation front, prices are expected to remain moderate, bolstered by favorable agricultural conditions resulting from increased Kharif production, promising Rabi sowing, and adequate reservoir levels.

The Indian economy recorded an impressive growth rate of 8.2% in Q2 FY26, following a robust 7.8% growth in Q1. This performance was driven by a significant increase in industrial growth, particularly in the manufacturing sector, alongside sustained activity in services.

The improved growth figures were also supported by a rise in consumption demand, spurred by policy initiatives such as income tax cuts and GST adjustments.

The favorable inflation scenario and early festive season demand have positively influenced consumption.