ICRA has lowered its estimate for India’s April-June quarter to 7%, marking a four-quarter low as slower services-sector expansion and geopolitical tensions weigh on economic momentum, with outlooks hinting at further slowdown in the coming fiscal year.
ICRA has cut its estimate for India’s economic growth in the April-June quarter to 7%, marking a four-quarter low and a clear step down from 7.8% in the previous quarter, as slower services-sector expansion weighed on the headline figure. The rating agency said industrial output is likely to have expanded by 7.7% and agriculture by 4%, while services growth is expected at 7.9% for the June quarter.
The agency’s chief economist, Aditi Nayar, said high-frequency indicators for industry and services pointed to solid domestic volume growth in the quarter, despite worries that higher commodity prices linked to tensions in West Asia could have hurt activity. ICRA said its 7% forecast broadly matches the Reserve Bank of India’s Monetary Policy Committee view for the period. The firm also said business sentiment among services companies weakened sharply in the quarter, with optimism falling to a five-year low amid wage pressures and uncertainty tied to the West Asia conflict.
For the full 2026-27 fiscal year, ICRA expects growth to slow to 6.7% from 7.7% in 2025-26, assuming crude oil averages $80 to $85 a barrel. Nayar said the outlook still carries downside risks from prolonged geopolitical tensions and uncertainty around the monsoon. Even so, ICRA expects nominal GDP growth to reach a four-year high of 13% in 2026-27, up from 8.9% in the previous year, on the back of firmer inflation.
Earlier ICRA forecasts had already pointed to a gradual loss of momentum after a stronger-than-expected 8.2% expansion in the second quarter of FY2026, when services growth hit 9.2%. The firm later warned that the second half of the year could soften because of tariff risks, restrained government capital spending and a weaker external environment. In that context, the latest downgrade suggests ICRA sees India’s domestic economy remaining resilient, but no longer growing at the pace seen earlier in the cycle.
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