India’s economic growth will likely be around 6.5% in 2025-26, aided by a lower interest rate regime, income tax cuts and a likely improvement in urban demand, PwC India experts said on Wednesday.
Retail Inflation
With retail inflation likely to remain at below the Reserve Bank of India (RBI)’s forecast of 3.7% for FY26, the central bank may cut the policy rate by another 25-50 basis points, said Ranen Banerjee, partner and leader, economic advisory; and Manoranjan Pattanayak, partner, economics and public policy at PwC (India).
“Urban demand has been positively impacted, and is being supported by income tax cuts,” Banerjee said. “I believe that Q2FY26 numbers (performance) for corporates will be much better than Q1,” he said, adding that the positive impact of tax cuts and interest rate cuts will be felt with a lag.
GDP Projection
“We should be landing somewhere around 6.5% GDP growth in FY26,” Banerjee said, adding that the government should continue its capex momentum for the next 10 years to sustain a high economic growth.
A steady increase in rural wages is supportive of rural consumption demand and the overall economic growth, Pattanayak said, adding that an above-normal monsoon is expected to support the farm sector and keep the rural demand buoyant.
The growth in nominal export (as captured by national accounts data) was capped at below 10% in three out of four quarters in FY25. The uncertainty over global trade poses challenges for India export earnings, PwC Indian experts said.