New Delhi. The Indian economy will grow at the rate of 6.6 percent in the next financial year (2025-26), while the gross domestic product (GDP) growth rate is estimated to be 6.4 percent in the current financial year (2024-25). Rating agency India Ratings and Research (Ind-Ra) has made this estimate. India Ratings and Research said on Wednesday that like the financial year 2021-22 and 2023-24, investment will be the main driver of growth for the Indian economy in 2025-26.

The Indian economy has seen a slowdown in cyclical growth in the last three quarters. This trend is expected to reverse in the October-December quarter. Gross domestic product (GDP) growth rate till FY 2023-24 was affected by the ill-effects of the COVID-19 pandemic. Even the base effect affected the quarterly GDP growth.

The economy facing these challenges
was affected by the strong base effect in the April-June quarter of FY 2024-25 and the general elections in May 2024. Weakness in private sector investment in the July-September period affected the growth rate. The rating agency believes that the Indian economy is facing strictness on the monetary, fiscal and external fronts. Although monetary conditions are now expected to ease, the impact of fiscal and external conditions is likely to continue in 2025-26 as well. Devendra Kumar Pant, Chief Economist and Head of Public Finance, Ind-Ra, said, "Nevertheless, GDP growth in FY2025-26 is expected to be similar to India's best decadal growth (FY10-11-2019-20)." The agency estimates that retail inflation will average 4.4 per cent in FY2025-26, lower than the forecast of 4.9 per cent for FY2024-25.

How will the financial year progress
RBI has expressed hope that the Indian economy will grow at an average rate of 7% in the second half of the year. Earlier, Ind-Ra had called it a “cyclical slowdown”, due to which the growth rate in the second quarter (Q2FY25) was 5.4%, the lowest in seven quarters. The Indian economy grew at a rate of 6% in the first half. Ind-Ra estimates that the growth rate will be 6.5% in this quarter (October-December) and it can reach 7% in the January-March quarter.

The estimate for the first half is 6.9%, which is slightly lower than the RBI's estimate of 7.1%. The agency says that investment will contribute a lot to this growth. Investment is expected to grow at a rate of 7.2% in FY26, which is estimated to be 6.7% in this financial year. Consumption growth rate is expected to increase marginally, which may increase from 6.7% in this financial year to 6.9% in the next financial year.