Fitch Ratings has upwardly revised India’s GDP growth forecast for the fiscal year 2025–26 (FY26) to 6.9%, up from its previous estimate of 6.5%, following an impressive 7.8% year-on-year growth in Q2 (April–June)—beating expectations.
What’s Driving Growth?
- Services-led Momentum & Consumption Power: Strong performances in the services sector and resilient domestic consumption have fueled the unexpected growth surge.
- Favorable Income & Financial Conditions: Rising real incomes and easier lending conditions are propelling further demand-led expansion.
Risks & Cautions Ahead
- Trade Tensions with the U.S.: Rising tariffs—some exceeding 50% on select goods—could dampen investment and sentiment if unresolved. Fitch expects these to soften over time but flags them as a key downside risk.
- GDP Calculations at Risk: With nominal growth closely trailing real growth due to low commodity prices, Fitch warns real GDP gains may be overstated, and a reversal in price trends could recalibrate the picture.
What’s Next: FY27 & FY28 Projections
| Fiscal Year | Growth Projection |
|---|---|
| FY27 | 6.3% |
| FY28 | 6.2% |
After the strong first half of FY26, the agency forecasts a gradual moderation to these levels.
Broader Implications for India’s Economy
- Positive Outlook: Fitch’s forecast is among the most optimistic for India’s FY26, highlighting the nation’s resilience amid global headwinds.
- Policy Flexibility: With inflation remaining subdued, the Reserve Bank of India may have room to maneuver—potentially implementing a 25 basis point rate cut later in the year. Reuters
Summary
Fitch Ratings has raised its FY26 GDP growth forecast for India to 6.9%, buoyed by a stellar 7.8% Q2 performance driven by domestic demand. While promising, the outlook is tempered by external trade risks and possible overstatements in real GDP. The forecast reflects confidence in India’s underlying economic resilience while recognizing structural challenges ahead.
