S&P Raises India`s GDP Forecast to 6.5% for FY26 by Amit Gupta, Kedia Advisory
S&P Global has raised India’s GDP growth forecast for FY 2025–26 to 6.5%, citing expectations of a normal monsoon, lower crude prices, and continued domestic demand. This aligns with the Reserve Bank of India’s Monetary Policy Committee (MPC), which also projects 6.5% growth. Strong rural activity, services sector momentum, and government-led capex are seen supporting this outlook. Inflation is forecast to ease to 3.7% despite rising core inflation. The report also highlighted risks from geopolitical tensions and global trade uncertainties. Regionally, Asia-Pacific growth remains vulnerable to U.S. tariff policies and weak Chinese imports, though domestic demand provides some resilience.
Key Highlights
* S&P revised India’s FY26 GDP growth forecast up to 6.5%.
* Normal monsoon and easing oil prices support economic optimism.
* MPC also projects 6.5% growth, citing rural and capex strength.
* Inflation is forecast at 3.7% amid easing food and energy prices.
* Global trade uncertainties and geopolitical tensions pose downside risks.
India’s economic outlook brightened after S&P Global revised the country’s GDP growth forecast for FY 2025–26 to 6.5%, citing a better monsoon forecast, easing crude oil prices, and sustained domestic demand. This 20 basis points increase from the earlier estimate brings S&P’s outlook in line with the Reserve Bank of India’s Monetary Policy Committee (MPC) projection.
Retail inflation also continues to ease, with May’s Consumer Price Index-based inflation falling to 2.82%, the lowest in 75 months. The MPC estimates FY26 inflation at 3.7%, supported by easing global energy prices and stable food inflation, despite a mild rise in core inflation.
On the demand side, both agencies pointed to resilient rural activity, private consumption, and government-led infrastructure investment as key drivers. High capacity utilization and improving corporate balance sheets are expected to boost fixed capital formation. Additionally, a projected normal southwest monsoon is expected to support agricultural output and allied activities.
However, geopolitical tensions, trade policy uncertainties, and weather-related risks remain potential headwinds. The delay in concluding FTAs, especially with the UK, also adds complexity, though progress on other trade fronts is a positive signal.
Across the Asia-Pacific region, S&P noted uneven resilience, with export-reliant economies like China facing greater vulnerability due to U.S. tariffs and slowing Chinese imports. Still, overall domestic demand remains healthy, helping offset external pressures.
Finally
India’s economic momentum looks stable for FY26, backed by supportive policy, domestic demand, and monsoon optimism—though global uncertainties remain critical factors to watch.
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