India’s domestic demand is showing signs of recovery, supported by several positive developments, according to a recent report by Crisil.
It highlighted that the healthy rabi output and easing inflation in the fourth quarter of fiscal 2025 are likely to boost consumption demand further.
“Improved growth in capital, infrastructure and construction goods’ output in the second half points at a gradual pick-up in construction/capital expenditure activity in the latter part of the fiscal. Finally, other high-frequency indicators show growth prospects improving in the fourth quarter,” the CRISIL report highlighted.
One of the key contributors to the improving demand is the better performance of the Index of Industrial Production (IIP) for manufacturing.
Crisil has further expected growth of 6.5% in fiscal 2026, with risks tilted to the downside.
Further on the recent US tariffs, the report said the US tariff hikes is a key risk to Crisil’s GDP growth forecast for fiscal 2026. “Slower global growth, along with anticipated reciprocal tariffs on India after three months, is likely to hit exports. Uncertainty about the duration and frequent changes in tariffs could hinder investments,” it added.
“We, however, expect the RBI’s monetary easing to create some offset to the external headwinds. Interest rate cuts, income tax relief and easing inflation are expected to provide tailwinds to consumption this fiscal, while the expected normal monsoon will support agricultural incomes,” the report said.