Business

Fitch Maintains India’s FY26 GDP Growth At 6.5%; Lifts FY27 Estimate

Fitch Ratings has maintained India’s gross domestic product (GDP) growth forecast for FY26 at 6.5%. It has also raised its FY27 projection by 10 basis points to 6.3%, according to its March Global Economic Outlook report.

The report warned that aggressive US trade policies could pose a risk to growth.

However, it noted that India remains somewhat insulated due to its low dependence on external demand.

The report highlighted that increased tax-free income allowances and revised tax brackets in the Budget will raise post-tax incomes.

This is expected to support consumer spending growth, though at a slower rate than this year.

Fitch assessed the Budget as broadly neutral for growth. It expects capital spending to increase over the next two financial years.

“Business confidence remains high, and lending surveys point to continued double-digit growth in bank lending to the private sector. These factors—along with lower capital costs – support our expectation of higher capital spending for FY26 and FY27,” Fitch said.

The Economic Survey projected GDP growth for FY26 at 6.3% to 6.8%.

Official estimates put GDP growth for the current financial year at 6.5%.

India’s real GDP growth slowed to 5.4% in the July – September 2024 quarter but rebounded to 6.2% in the next quarter.

Fitch noted that consumer confidence has dipped, and vehicle sales have fallen significantly.

However, lower inflation should boost real incomes.

Labor market indicators suggest steady employment growth and higher participation.

Net exports have supported GDP growth this year due to strong exports and falling imports.

Fitch expects this to normalize, making net exports’ contribution broadly neutral over FY26 and FY27.

The agency expects two more rate cuts this year, lowering the policy rate to 5.75% by December 2025.

In February, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 6.25%.

“Food price trends will enable a gradual decline in inflation to 4% by end-2025, followed by a mild increase to 4.3% by December 2026,” the report added.

Last week, Moody’s Ratings raised India’s growth forecast for the next financial year to 6.5%, citing higher government capital expenditure and increased consumer spending.

Also Read: Barclays Bank Infuses ₹2,300 Crore To Expand India Operations

Ajaypal Choudhary

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