New Delhi – Economic activity in the first two months of the current fiscal year has shown a mixed pattern, but a report released on Wednesday revealed that nine key non-agricultural indicators recorded improvement compared to Q4 of FY25. Meanwhile, the output of summer crops is expected to grow at a healthy pace.
The indicators that showed positive growth in April-May include:
- Government capital expenditure
- Passenger vehicle (PV) production
- GST e-way bill generation
- Government’s non-interest, non-subsidy revenue expenditure
- Consumption of petrol and diesel
- Non-oil merchandise exports
- Vehicle registrations
- Output from Coal India Ltd (CIL)
These trends are a promising sign for industrial and services Gross Value Added (GVA) growth in the current quarter.
According to a report by ICRA, while monsoon rains have resumed after an early-June break, the timing and distribution of rainfall will be key to ensuring successful kharif sowing and sustaining rural demand.
The report also notes that urban consumption prospects remain strong, boosted by income tax relief, recent interest rate cuts, and easing food inflation.
Looking ahead, rural sentiment appears optimistic, which should drive demand for two-wheelers and tractors. Urban demand is also expected to remain robust, supported by tax benefits and lower borrowing costs.
However, global risks remain a concern due to ongoing geopolitical tensions, market volatility, and uncertainty around trade tariffs.
Despite these risks, ICRA has retained its GDP growth forecast for FY26 at 6.2%.
With a favourable monsoon and expected decline in food inflation, consumer price index (CPI) inflation is projected to drop to 3.5% in FY26, down from 4.6% in FY25, and below the RBI’s forecast of 3.7%.
While a rate pause is expected in August 2025, ICRA suggests there could still be a final 25 basis point rate cut in October 2025, depending on how growth and inflation evolve.
Assuming crude oil averages $70 per barrel in FY26, India’s current account deficit (CAD) is expected to remain manageable at 1.1–1.2% of GDP, the report added.
With inputs from IANS