Fitch Ratings on Thursday revised India’s GDP growth forecast for FY26 to 7.4%, up from its earlier estimate of 6.9%, citing strong domestic demand and the positive impact of recent tax reforms.
The global rating agency said private consumption remains the primary engine of growth this fiscal year, supported by “strong real income dynamics, improved consumer sentiment, and the benefits of goods and services tax reforms.” It added that robust household spending has kept economic momentum firm despite external challenges.
For FY27, Fitch expects growth to moderate to 6.4%, with domestic demand continuing to drive the economy. Public investment is likely to soften, while private investment is expected to strengthen in the second half of FY27.
India’s economy expanded by 8.2% in the July–September quarter of FY26, reflecting strong underlying activity. Fitch noted that this performance comes even as India faces among the highest effective tariff rates—around 35%—on exports to the United States. A trade agreement between the two countries, it said, would help boost external demand.
The agency forecasts India’s inflation to average 1.5% this fiscal, with consumer inflation easing to 0.3% in October. The sharp cooling in prices, Fitch said, should give the Reserve Bank of India room for one more rate cut at its December 5 policy meeting, bringing the repo rate to 5.25%. It expects the central bank to hold rates steady over the next two years as the easing cycle concludes.
Fitch also expects the Indian rupee to strengthen to around 87 per US dollar next year.
Globally, the rating agency has slightly raised its world growth projections for 2025 based on stronger-than-expected economic data from the second quarter. However, it flagged signs of a slowdown in the US and said recent eurozone gains reflected front-running of US tariffs. Fitch continues to expect a marked global growth slowdown this year.
(With IANS inputs)
