S&P Global Revises India's GDP and Inflation Projections
S&P Global Ratings maintained India’s GDP growth forecast for FY25 at 6.8% while revising FY26 down to 6.7% from the earlier estimate of 6.9%. The agency also raised its inflation projection for FY25 to 4.6%, reflecting persistent food inflation and supply shocks in agriculture caused by climate factors like changing rainfall patterns and heatwaves. The Reserve Bank of India (RBI), mandated to keep inflation at 4% ± 2%, is expected to cut policy rates only once this fiscal year, with the repo rate held steady at 6.5% since February 2023.
FY25: S&P retained the growth estimate at 6.8%, citing stable purchasing manager indices (PMIs) indicating economic expansion, though high interest rates and reduced fiscal spending are tempering urban demand.
FY26: Growth forecast lowered to 6.7%, reflecting global headwinds and domestic factors such as a construction sector slowdown in Q2 FY25.
Inflation FY25: Raised to 4.6% (from 4.5%) due to agricultural supply shocks driven by climate irregularities.
RBI’s Dilemma: Food inflation, accounting for 46% of the inflation basket, has become harder to predict, complicating monetary policy decisions.
FY26 Inflation: Revised down to 4.4% (from 4.6%).
Asia-Pacific: Growth dampened by weaker global demand and U.S. trade policies. China’s 2026 GDP growth projection was also cut to 3.8% from 4.5%.
India’s Momentum: Despite recent slack, the RBI predicts stronger recovery ahead, with a projection of 7.2% growth for FY25 in its latest bulletin.
This update reflects both India’s resilience in maintaining steady growth and the challenges posed by inflationary pressures, global trade dynamics, and climate-induced agricultural shocks. The cautious monetary stance and persistent inflation signal a balancing act between growth and price stability.
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