Consumption will stimulate growth, not investments: Indranil Pan

Fitch Ratings recently revised the FY26 GDP growth -forecast of India to 6.9%, with reference to resilient domestic demand, GST restructuring and the possibility of another interest rate that has been reduced by the reserve Bank of India (RBI). However, according to Indranil Pan, Chief Economist at YES Bank, the prospects strongly depend on assumptions, in particular around global trade tensions.

PAN noted that Fitch expects that the tariff peels with the US will relieve, with the fine rates, eventually lowered. “If conversations between India and the American progress are good, the tariff effect on growth can be manageable,” he said. He added that GST changes should support consumption, while another RBI rate reduction could give the economy a further push.

Yes, Bank itself has somewhat raised its growth gursing – from 6.5% to 6.6% – after the surprise of India 7.8% of GDP in the first quarter. But Pan warned that too many “moving pieces” remain. Get damage in Punjab and parts of West Bengal were able to weigh on agriculture, despite strong sowing data. In the meantime, weak wage growth and employment can continue to influence urban consumption.

On Growth Motors, PAN said that the demand in the countryside is currently stronger, helped by monsoons and farm activities, while GST cuts will soon be able to support urban consumption. However, he marked the concern that the private Capex should not pick up meaningfully, so that domestic consumption consumption is the most important pillar for growth in the short term.

Although monetary relaxation has offered support, PAN pointed out that the transfer of RBI’s tariff reductions is limited. “Of the 100 basic points, only about 39-40 basic points have continued on loan percentages. Credit growth still has to demonstrate the kind of momentum that we want,” he said.

In general, PAN emphasized that although enablers such as GST reform, income tax reductions and RBI’s liquidity measures are in force, uncertainty about rates and jobs means that consumption trends must be carefully viewed before a long -term recovery is explained.