The Indian economy is expected to maintain a steady growth rate of 6.5 per cent in the financial year 2025–26, supported by easing crude oil prices and strong domestic fundamentals, even as global trade tensions escalate, according to EY’s latest Economy Watch report released on Friday.
The report outlines four key external factors that could influence India’s economic trajectory in the coming quarters: softening exports, a global economic slowdown, falling crude oil prices, and surplus production capacity in exporting nations. While acknowledging these challenges, EY projects that India can sustain its growth momentum with the right mix of fiscal and monetary policy measures.
“With suitable fiscal and monetary policies, India may be able to sustain a real GDP growth at about 6.5 per cent in FY26 as also in the medium term, while maintaining a CPI inflation below 4 per cent. We also expect global crude prices to remain in the range of USD 60-65/bbl in FY26, which may be to India’s advantage,” said D.K. Srivastava, Chief Policy Advisor at EY India.
Crude oil prices, which have declined from $75 per barrel in early April to around $65 mid-month, are expected to remain within the $60–65 range for the fiscal year. This would provide a cushion against inflationary pressures and reduce import costs, strengthening domestic consumption and investment, the report said.
India’s GDP Outlook
The report notes that while higher global tariffs and weak demand may impact India’s exports, the contribution of net exports to GDP remains modest, limiting the overall drag on growth. However, excess supply from global exporters may increase dumping risks, prompting the need for protective trade measures.
EY also highlighted the strategic realignment in external trade. Suggestions include diversifying crude oil imports, particularly from the US, to improve trade balances, and finalising a bilateral trade agreement with Washington by late 2025.
For long-term resilience, the report advocates structural reforms in land and labor, investment in human capital, and expanded support for sectors under the Production-Linked Incentive (PLI) scheme. Strengthening ties with key partners like the UK, EU, and regional allies is also recommended.
Despite global uncertainties, EY asserts that India remains well-positioned to maintain robust growth, provided it continues with proactive policy management and trade diversification strategies.
