NEW DELHI: The Indian economy is projected to grow 7.1 per cent in the financial year 2026–27 (FY27), supported by private consumption and a mild pick-up in private investment, but with risks tilted to the downside as global trade tensions, tariff actions and geopolitical frictions keep the external environment “squally”, according to Crisil’s latest India outlook.
The report, titled India Outlook: Wading through Squally Waters, notes that India’s expansion has retained “real traction” despite a turbulent global cycle. It highlights that domestic demand has acted as a counterweight to global uncertainty, backed by stronger macro fundamentals, improved corporate balance sheets and a more responsive policy framework.
On trade, the rating agency said global trade is shifting from pure efficiency to resilience and strategic alignment, creating a “material opportunity” for India. Even as earlier export front-loading fades, the agency expects exports to “hold up better than feared” in FY27 on the back of steady global growth, strong services exports, export-focused manufacturing policies and reduced US tariff rates.
“India has the potential to grow faster by creating fresh infrastructure, improving logistics and undertaking reforms. That is why India has been charting an upward-sloping trajectory while advanced countries have been charting a downward-sloping trajectory,” said Dharmakirti Joshi, chief economist at Crisil.
On tariffs, Crisil pointed out that tariff changes can “quickly change relative competitiveness and supply-chain decisions” and that India’s trade outlook sits at the intersection of global tariff shifts and domestic policy choices. It noted that easing tariff rates in key markets can provide incremental support to exports, even as renewed trade uncertainty remains a downside risk.
Crisil attributed the resilience built into the domestic growth engine to robust private consumption, rapid spread of unconditional cash transfers by states, a gradually broadening investment cycle with recovering private capital expenditure, especially in emerging and production-linked incentive (PLI) sectors, and policy responsiveness, including monetary easing and tax-and-transfer measures.
“India managed to reduce its fiscal deficit-to-GDP ratio, which means there is some fiscal cushion for emergencies and now we are targeting the debt. So even if there is some fiscal pressure, it can be corrected over the cycle,” Joshi said, adding that inflation remains reasonably benign to allow further policy support.
Crisil, however, warned that downside risks to this outlook include prolonged geopolitical tensions, particularly in the West Asia, renewed trade uncertainty, and weather-related shocks such as potential El Niño effects on agriculture.
The present West Asia conflict has “the potential to become a poly-crisis” if it persists, Joshi warned. He flagged four channels of risk: an energy shock, a trade shock given India’s sizeable commerce with the region, sharply higher freight costs that are “currently playing out”, and broader risk sentiment that could hit capital flows. Input costs are already rising, gas supplies have been curtailed, and some rationing to industry is visible, he said, adding another layer to what is already “quite high” uncertainty.
Against this backdrop, Crisil stressed that India does have meaningful buffers, but they are not a shield against a very large or prolonged shock. Joshi pointed to the strategic petroleum reserves and alternative sources of oil supply, even if these cannot fully replace crude that might be disrupted through key chokepoints.
Based on an analysis of 900 large listed companies that together account for roughly two-thirds of the Bombay Stock Exchange’s market capitalisation, Crisil expects revenue growth of about 9 per cent in the coming year, broadly in line with the past decade’s average and similar to the current fiscal.
The main engine will be consumer discretionary sectors such as automobiles, consumer durables, telecom and organised retail, which are benefiting from tax cuts, the Goods and Services Tax (GST) reconfiguration and a host of direct benefit transfers that have supported household spending. By contrast, more muted growth is expected in steel, mining and construction.
Source: Business Standard
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