Indian economy could grow at 6.5 per cent in the current fiscal as lower prices of crude oil are expected to ease inflationary pressure and support domestic growth, despite intensifying global trade tensions, EY said on Friday. The ' EY Economy Watch' report for April identifies four key interlinked effects which would have a bearing on India's growth - reduced exports, global slowdown, falling crude oil prices, and the impact of global excess production capacities.
"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," EY India Chief Policy Advisor D K Srivastava said.
It said exports may slow due to higher tariffs and weakening global demand, but the overall GDP impact may be limited, given the subdued role of net exports in India's recent growth experience.
Global slowdown may constrain growth worldwide, but India's relatively strong fiscal space and monetary flexibility provide scope for calibrated stimulus.
Excess production capacities in major exporting nations could lead to dumping risks, requiring India to consider targeted anti-dumping measures.
Falling crude oil prices dropping from USD 75/bbl in early April to USD 65/bbl by mid-month, and remaining within an expected range of USD 60-65 during FY26, is expected to support domestic growth while easing inflationary pressures.
"India's response to these global disruptions must be strategic and multi-pronged. We see the potential for India to emerge relatively stronger, provided it continues to manage its macroeconomic fundamentals well through a growth-oriented fiscal policy and accommodative monetary stance," Srivastava said.
EY Economy Watch suggests that India's short-term strategy could include switching part of its crude oil imports to the US thereby improving trade balance and lowering its reciprocal tariff rate.
A comprehensive bilateral trade agreement, expected by September-October 2025, could further enhance trade stability with the US.
From a medium to long-term perspective, the EY Economy Watch underscores the importance of accelerating reforms in land and labour, investing in education, skilling and emerging technologies like AI and GenAI, and expanding PLI coverage.
The EY report also recommends that India should deepen trade ties with the UK, EU, and select regional partners.
"With proactive macroeconomic management and external sector realignment, India appears well-positioned to maintain growth momentum despite global headwinds," the report said.
EY's India growth projections for 2025-26 are within the range of 6.2-6.7 per cent projected by global agencies.
The economy is estimated to have grown at 6.5 per cent in the last fiscal (2024-25).
The International Monetary Fund (IMF) and the World Bank project growth to be 6.2 per cent and 6.3 per cent, respectively in FY26
While the RBI and S&P Global Ratings project FY26 growth at 6.5 per cent, the OECD and Fitch Ratings forecast GDP expansion at 6.4 per cent amid the ongoing tariff war and uncertainty over the US trade policy.
On April 2, US President Donald Trump had announced reciprocal tariffs or taxes on imports from other countries to match the duties levied by those countries on imports from the US.
On April 9, the US administration authorised a 90-day pause on the implementation of most reciprocal tariffs, reverting to a universal rate of 10 per cent on almost all targeted countries, while raising tariffs on most goods from China to 145 per cent. On April 16, the US further hiked tariffs on exports from China to 245 per cent.
"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," EY India Chief Policy Advisor D K Srivastava said.
It said exports may slow due to higher tariffs and weakening global demand, but the overall GDP impact may be limited, given the subdued role of net exports in India's recent growth experience.
Global slowdown may constrain growth worldwide, but India's relatively strong fiscal space and monetary flexibility provide scope for calibrated stimulus.
Excess production capacities in major exporting nations could lead to dumping risks, requiring India to consider targeted anti-dumping measures.
Falling crude oil prices dropping from USD 75/bbl in early April to USD 65/bbl by mid-month, and remaining within an expected range of USD 60-65 during FY26, is expected to support domestic growth while easing inflationary pressures.
"India's response to these global disruptions must be strategic and multi-pronged. We see the potential for India to emerge relatively stronger, provided it continues to manage its macroeconomic fundamentals well through a growth-oriented fiscal policy and accommodative monetary stance," Srivastava said.
EY Economy Watch suggests that India's short-term strategy could include switching part of its crude oil imports to the US thereby improving trade balance and lowering its reciprocal tariff rate.
A comprehensive bilateral trade agreement, expected by September-October 2025, could further enhance trade stability with the US.
From a medium to long-term perspective, the EY Economy Watch underscores the importance of accelerating reforms in land and labour, investing in education, skilling and emerging technologies like AI and GenAI, and expanding PLI coverage.
The EY report also recommends that India should deepen trade ties with the UK, EU, and select regional partners.
"With proactive macroeconomic management and external sector realignment, India appears well-positioned to maintain growth momentum despite global headwinds," the report said.
EY's India growth projections for 2025-26 are within the range of 6.2-6.7 per cent projected by global agencies.
The economy is estimated to have grown at 6.5 per cent in the last fiscal (2024-25).
The International Monetary Fund (IMF) and the World Bank project growth to be 6.2 per cent and 6.3 per cent, respectively in FY26
While the RBI and S&P Global Ratings project FY26 growth at 6.5 per cent, the OECD and Fitch Ratings forecast GDP expansion at 6.4 per cent amid the ongoing tariff war and uncertainty over the US trade policy.
On April 2, US President Donald Trump had announced reciprocal tariffs or taxes on imports from other countries to match the duties levied by those countries on imports from the US.
On April 9, the US administration authorised a 90-day pause on the implementation of most reciprocal tariffs, reverting to a universal rate of 10 per cent on almost all targeted countries, while raising tariffs on most goods from China to 145 per cent. On April 16, the US further hiked tariffs on exports from China to 245 per cent.
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