India’s growth is expected to be relatively stable, at 6.2% in FY26 and 6.3% in FY27, while the “significant downward revision” was 0.6%, respectively, with a fiscal point of 0.6%, while China’s growth outlook fell by 0.5%, and now, China’s growth outlook is 4%.
For China, moderate growth is expected in 2027, followed by subsequent declines.
Despite the ongoing global uncertainty, India may be able to achieve a true GDP growth of 6.5% in fiscal 26.
“The title inflation rate is expected to be relatively stable in India. The CPI inflation rate in 2025 is 4.2% (FY26) and 4.1% (FY27) in 2026, and 4% is close to the central bank’s target level since then,” the report said.
With CPI inflation likely to be 4% or below 4% or below, an average of 26 years, India should be able to achieve real GDP growth of 2.5%, while the continued slowdown cycle in FY26 and the government has resumed strong emphasis on capital expenditures.
“Our expectation is that inflation in Q1 could average about 3.4% in Q1 and full-year inflation is in the range of 3.5% to 4.0%. This works well for continuing the fiscal 26-year reduction cycle. We expect the repurchase rate to drop to 5.25% by the end of the 2025 calendar year.”
High-frequency indicators for April and May 2025 indicate that continuous policy support is needed to maintain growth momentum.
The manufacturing PMI rose to a 10-month high of 58.2 in April 2025, while the service PMI increased to 58.7, well above its long-term average of 54.2. In April 2025, the total revenue of GST collections was Rs 2.37 crore, the highest monthly collection ever since GST was founded.
The growth of total bank credit remained almost stable, reaching 12.1% in March 2025, and its level was close to 12.0% in February 2025. The growth of commodity exports and imports increased to 9.0% and 19.1% in April 2025, from 0.7% and 1225, respectively, from 0.7% and 11.4% in March 20225, respectively.
According to the EY report, India may need to rely on its monetary and fiscal policy leverage to mitigate the adverse effects of domestic development and a slowdown in global GDP growth.
The report stressed: “At this juncture, the growth momentum of the government’s capital expenditure needs to be restored and supplemented by continuing the recovery and supplementation of the cycle of lowering the repo rate, to ensure monetary and fiscal policy support can ensure that India’s true GDP growth does not suffer a 6.5% loss in the 6.5% fiscal year.”
