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Economic Outlook & Macro Trends

Economic momentum cooled in March 2026, post onset of West Asia conflict; GDP growth pegged at ~7.0% in Q4 FY2026

Monthly Update 22 Apr 2026

The YoY growth in economic activity, as measured by the ICRA Business Activity Monitor - an Index of high frequency indicators, eased to a 5-month low of 7.6% in March 2026 from 10.0% in February 2026. As many as 10 of the 16 constituent indicators reported a deterioration between these months, including some trade and transport-related indicators, reflecting the adverse impact of the West Asia conflict. Nevertheless, the momentum in economic activity remained quite healthy in Q4 FY2026, with a majority of non-agri indicators witnessing an improvement in their YoY performance over Q3. 

ICRA currently pegs the GDP growth at 7.0% in Q4 FY2026, lower than the National Statistical Office (NSO’s) implicit growth projection of 7.3% for the quarter. A large part of the adverse impact of the West Asia crisis is likely to manifest in Q1 FY2027. Assuming an average crude oil price of $85/barrel in FY2027, ICRA projects the GDP growth to slow down to 6.5% in the ongoing fiscal from 7.5% estimated for FY2026. These estimates are subject to sizeable downside risks owing to a further escalation of the conflict and tighter availability of inputs, as well as the impact of the potential development of El Nino conditions and a below-normal monsoon (forecast: 92% +/-5% of Long Period Average; lowest estimate in last 25 years).

Oil prices and ICRA’s macro forecasts

CPI/WPI: Consumer/Wholesale Price Index; CAD: Current Account Deficit; Source: ICRA Research

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