Rating agency Icra in its Macro Update June 2025 has retained India's Gross Domestic Product (GDP) growth forecast for fiscal 2025-26 (FY2026) at 6.2 per cent, assuming well-distributed monsoons and crude oil prices averaging around $70/barrel. However, it said geopolitical tensions in West Asia, volatility in financial markets, and uncertain trade policies pose downside risks to this growth outlook, which have intensified.

The report said ‘Economic activity has displayed a mixed trend in the first two months of FY2026, with only nine of the 17 non-agri indicators showing an improvement over Q4 FY2025, even as the output of summer crops is estimated to grow at a healthy pace’. The early onset of monsoons in May 2025 partly weighed upon the performance of the electricity and mining sectors. It also said the prospects for urban consumption remain bright owing to the income tax relief, rate cuts and softening food inflation. However, global risks remain elevated amid geopolitical tensions in West Asia, volatility in global financial markets and lingering uncertainty around tariff policies, posing headwinds to domestic growth.

It further said aided by the favourable monsoon forecast and likely dip in food inflation, the CPI inflation is projected to cool to 3.5 per cent in FY2026 from 4.6 per cent in FY2025, lower than the Monetary Policy Committee's (MPC's) forecast of 3.7 per cent. It also said that while a pause is likely in August 2025, it does not rule out the possibility of a final 25 basis points rate cut in October 2025, based on its subdued growth-inflation outlook. It said that a $10/barrel increase in the average crude oil price would lead to a $13-14 billion rise in net oil imports, increasing the CAD (current account deficit) by 0.3 per cent of GDP.