India’s economy is projected to grow at 6.5 per cent in the current fiscal year (FY26), driven by strong domestic demand, a normal monsoon, and expected monetary easing, according to a report by S&P Global Ratings released on Tuesday.
The report, which covers Asia-Pacific economies, noted that India’s domestic demand resilience is especially crucial in limiting economic slowdowns in economies less reliant on goods exports.
“We see India’s GDP growth holding up at 6.5 per cent in fiscal 2026 (year ending March 31, 2026). That forecast assumes a normal monsoon, lower crude oil prices, income-tax concessions, and monetary easing,” the report stated.
Falling food inflation has also contributed to easing overall inflation pressures in the country.
India’s Wholesale Price Index (WPI)-based inflation dropped to a 14-month low of 0.39 per cent in May, down from 0.85 per cent in April and 2.05 per cent in March. Meanwhile, Consumer Price Index (CPI)-based retail inflation declined to 2.82 per cent in May—its lowest level since February 2019—compared to the same month a year ago.
Food inflation specifically fell to 0.99 per cent in May, the lowest since October 2021. This marks the seventh consecutive month of declining food inflation, supported by rising agricultural output.
In response to the continued disinflationary trend, the Reserve Bank of India (RBI) has revised its inflation outlook for 2025–26 downward, from 4 per cent to 3.7 per cent. RBI Governor Sanjay Malhotra announced a 50 basis points cut in the repo rate—from 6 per cent to 5.5 per cent—during the recent monetary policy review to support economic growth.
The S&P report also observed that many Asia-Pacific economies began 2025 with strong domestic demand. Several economies temporarily benefited from front-loaded exports to the United States ahead of anticipated tariff changes. In India, economic activity picked up after a period of slower growth.
For comparison, S&P projects GDP growth of 4.3 per cent for China in 2025 and 4.0 per cent in 2026. While these figures fall short of China’s official growth targets, the report described them as “solid results” given the current external challenges.
Chinese imports are expected to remain subdued this year and next, though not as weak as exports.
The report noted that Asia-Pacific economies continue to face external pressures, particularly from uncertain U.S. trade policy and sluggish Chinese imports.
“We expect domestic demand to broadly remain healthy, in part because of policy easing. But what this means for the resilience of regional economies varies sharply, with export-dependent ones less well placed,” the report added.
(IANS)
