Government capital expenditure, rising consumer spending will boost India's GDP growth in 2025-26

The Federation of Indian Chambers of Commerce and Industry (FICCI) is optimistic about India's economic outlook for 2025-26, as it expects the government's continued focus on capital expenditure and increased consumer spending to boost growth despite external challenges.

On the investment front, the government's focus on capital expenditure will remain the key driver of growth in 2025-26, the apex trade body's latest economic outlook report said.

Investment in infrastructure and allied sectors – such as roads, housing, logistics and railways – is expected to further boost economic momentum, the report said.

Consumer spending is expected to pick up, driven by an improved outlook for the agriculture sector, which is likely to boost rural consumption and sentiment in the first half of the next financial year. Food inflation – which has remained high for more than a year and is putting pressure on household budgets – is expected to ease.

Additionally, monetary easing by the Reserve Bank of India (RBI), which will result in lower interest rates, may also provide additional stimulus to consumption, it said. The industry body noted in its latest economic outlook, “Considering these factors, the participating economists forecast India’s GDP growth for FY 2025-26 between 6.5 per cent and 6.9 per cent – Which reflects a balanced approach taking into account both opportunities and challenges.” The report expects inflation to moderate with a CPI-based inflation forecast of 4.8 percent for 2024-25. This is in line with RBI's projection in the latest monetary policy announcement in December 2024. As far as the expected impact of new US President Trump's policies on the Indian economy is concerned, the report indicated the possibility of short-term disruptions through channels such as exports, foreign capital flows and input costs for US trading partners, including India. Has been given.

The report further said that trade tensions, including a potential US-China trade conflict, could disrupt supply chains and increase input costs in the short term. However, economists expect the US to take a balanced approach towards India. India is also expected to benefit from global supply chain diversification away from China, the report said. “Targeted industrial policies and sector-specific strategies will remain critical to capitalizing on these opportunities,” the report said. India may also benefit from lower global oil prices due to increased US production. “To address risks and unlock opportunities, economists have recommended that India should evaluate reducing tariffs on select and specific US imports while ensuring revenue sustainability and minimal domestic impact.”