Forecast Upgrade:
- ICRA revised India’s GDP growth forecast for FY26 to 6.5%, up from 6% earlier.
- Revision driven by GST rate cuts and income tax relief, releasing nearly ₹3 lakh crore into household hands.
Impact of GST & Policy Support:
- Consumption boost expected to cushion the impact of steep US import tariffs (up to 50% on Indian goods).
- Exporters mitigating tariff shock by:
- Diversifying markets (Mexico, Europe, Dubai).
- Increasing product value.
- Leveraging subsidiaries in tariff-free zones.
Sectoral Impact:
- Auto sector: Diversification & higher value addition to sustain exports.
- Metals sector: Limited disruption; exporters passing costs to US buyers due to lack of domestic substitutes.
- NBFCs & Banks: Consumption lift to improve credit quality and demand despite earlier stress in retail/MSME loans.
Credit Growth Projections
Bank credit:
- FY26: ₹19–20.5 lakh crore (10.4–11.3% growth).
- FY25: ₹18 lakh crore (10.9% growth).
- FY24: 16.3%.
NBFC credit (excl. infra):
- FY26: 15–17%.
- FY25: 17%.
- FY24: 24%.
- Liquidity & CRR cut expected to support competitive lending environment.
Risks Highlighted by ICRA:
- MSMEs & unsecured personal loans remain vulnerable:
- MSME loans form 17% of non-food bank credit (₹184 lakh crore as of July 2025).
- Small business + unsecured loans form 34% of NBFC book (₹35 lakh crore as of March 2025).
- Geopolitical risks and export weakness could trigger stress.
About ICRA
- Indian Credit Rating Agency Limited (ICRA), established in 1991, is an independent professional investment information and credit rating agency.
- Headquartered in Gurugram, Haryana.
- Moody’s Corporation is its largest shareholder (~51%).
GDP Measurement in India
- Calculated by National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
- India follows real GDP (constant prices) as benchmark for growth trends.
- GDP is classified into: Agriculture, Industry, Services sectors.
US Tariffs on India
- India exports over 140 product categories to the US.
- Key sectors: Auto components, seafood, metals, textiles.
- Current tariff rates on Indian goods: up to 50%, higher than on China, Vietnam, Bangladesh, Japan.
Credit & Banking Context
- CRR (Cash Reserve Ratio): Percentage of a commercial bank’s net demand and time liabilities (NDTL) kept with RBI as cash reserves.
- NBFC (Non-Banking Financial Company): Financial institutions providing banking-like services but not allowed to accept demand deposits.