Fitch Forecasted India’s GDP Growth For FY26 To 7.4% From 6.9% Led By High Consumer Spending & GST Reforms

Fitch Ratings forecasted India’s GDP growth for FY26 to 7.4% which was earlier at 6.9%.

The change in growth driven by robust consumer spending and the rate cut in GST impacted positively, the agency cited.

These estimates come a week after India’s GDP saw a six-quarter high growth rate of 8.2% in the second quarter of FY26 rose from 5.6% in the same period in FY 2025.

Meanwhile, consumer price inflation in October came down to an all-time low of 0.3%, with lower food and drink prices, -3.7% in the year to October, being the reason behind.

Since June, food prices have been falling on an annual basis due to sufficient food stocks and an above-average monsoon.

Core Inflation is still at above 4% since February, and high gold and silver prices have given it resilience recently. Base effects will push inflation above target by the end of 2026; we expect only a slight decline in 2027.

Fitch expects the Reserve Bank of India (RBI) to have likely reached the end of its monetary policy easing cycle.

Policy Rates to Remain Stable

While falling inflation may allow one final rate cut to bring the policy rate to 5.25%, Fitch expects the central bank to hold that rate steady for the following two years.

The prediction follows 100 bp of cumulative rate cuts in 2025, alongside reductions in the cash reserve ratio from 4% to 3%.

However, as core inflation begins to recover and economic activity remains strong, Fitch expects the RBI to maintain the current 5.25% rate to ensure stability.

The Rating Agency expects falling inflation will create a space for the Reserve Bank of India (RBI) to make one more policy rate cut in December to 5.25% followed by 100bp cuts in 2025 so far, and a series of reductions in cash reserve ratio (from 4% to 3%).

The central bank concluded its easing cycle with a series of cash reserve ratio reductions (from 4% to 3%). It is projected that core inflation will recover and economic activity will remain robust. Consequently, rates are likely to stay at 5.25% for the next two years.

Owing to the trend assessment, the growth will slow down in FY 27 to 6.4% with domestic demand and consumer spending remaining the main drivers.

As higher imports balance the stronger domestic demand growth, the growth will decline to 6.2% in FY28, Fitch expected.

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