Fitch Ratings has raised India’s GDP growth forecast for fiscal 2025-26 (FY26) to 7.4%, up from the previous forecast of 6.9%.
The upgrade comes after stronger-than-expected economic performance in recent quarters, supported by rising consumer spending, tax reforms under Goods and Services Tax (GST), and easing inflation. The Economic Times
🚀 What’s Fueling the Upgraded Forecast
According to Fitch:
- Robust consumer demand — Private consumption remains the main growth driver, thanks to improved real incomes and consumer sentiment.
- GST-driven price reliefs — Recent GST cuts on several items have reduced inflationary pressure and boosted disposable incomes.
- Low inflation creating policy space — Falling inflation gives the Reserve Bank of India (RBI) room for another possible interest-rate cut, which could further support investment and spending
Fitch also noted that growth accelerated in the September quarter, giving the agency confidence in a stronger full-year outcome.
What It Means for India’s Economy & Markets
- Stronger investment climate: A higher growth forecast improves investor confidence — good news for equity markets, foreign capital inflows, and business expansion plans.
- Consumer-driven growth continues: As consumer demand remains strong, sectors like retail, FMCG, services, and real-estate may see sustained momentum.
- Room for rate cuts: With inflation under control, monetary policy easing by RBI could support borrowing, lending, and investment across sectors.
- Reforms paying off: GST adjustments and tax reforms — along with fiscal prudence — may reinforce India’s macroeconomic stability and long-term growth prospects.
What to Watch: Risks & What Could Derail Growth
- Global headwinds: External factors such as global commodity prices, trade slowdowns or geopolitical tensions could impact export demand and inflation.
- Slowing global demand: While domestic demand remains strong, weaker global demand could hit export-oriented sectors.
- Inflation volatility: A rebound in food or energy prices could destabilize inflation, limiting RBI’s scope for further rate cuts.
- Sustainability of consumption: Continued growth depends on stable incomes; any slowdown in wage growth or job creation could dampen consumer demand.
Looking Ahead
With the revised forecast, many economists and analysts expect that FY26 could emerge as a strong growth year for India. Lower interest rates, upbeat consumer demand, and favourable policy conditions may together support a robust growth trajectory.
Still, sustaining this momentum will require managing global risks, ensuring stable inflation, and encouraging investment — both domestic and foreign — to avoid growth being too consumption-centric.
