India's GDP growth expected to moderate in FY26: EY Economy Watch

The factors leading to a cautious outlook include problems in supply chains, recent US tariffs and general uncertainty in global trade and geopolitics.

The country’s growth will be due to strong domestic demand, lower inflation and supportive monetary policies that may encourage private investment, it noted.

The country’s government may have to carefully mix monetary and fiscal policies to maintain growth in the near future, EY cautioned.

"On the monetary front, a continuation of the ongoing rate cut cycle could provide support to consumption and investment. On the fiscal side, reviving the momentum in public investment, especially GoI's [government of India] capital expenditure, which witnessed a moderation in growth in FY25, will be important to sustain economic activity," EY added.

The country’s consumer price index-based inflation eased to a 69-month low of 3.2 per cent in April this year, while manufacturing purchasing managers’ index increased to a ten-month high of 58.2 in the month.

Merchandise trade deficit increased to a six-month high of $26.4 billion in April, owing to a sharp increase in growth in imports.

Fibre2Fashion News Desk (DS)