S&P Lowers India’s Growth Forecast for FY26 to 6.5%

S&P Global has revised India’s GDP growth forecast for the financial year 2025-26 (FY26) down by 20 basis points (bps) to 6.5%, compared to its earlier estimate of 6.7%. The forecast assumes a normal monsoon season and stable commodity prices, particularly crude oil. The agency also noted that India’s services-led exports to the US remain resilient, despite global trade uncertainties and tariff-related concerns. Additionally, easing food inflation, tax benefits from the FY26 Budget, and lower borrowing costs are expected to support domestic consumption.

Key Highlights

Growth Forecast Revision

• S&P Global lowered India’s GDP growth forecast for FY26 from 6.7% to 6.5%.
• The projection matches the growth rate of the previous financial year.

Economic Assumptions

• A normal monsoon season is expected.
• Commodity prices, especially crude oil, are anticipated to remain soft.

Factors Supporting Growth

• Cooling food inflation will ease pressure on households.
• Tax benefits from the FY26 Budget will boost discretionary spending.
• Lower borrowing costs are expected to encourage investment and consumption.

RBI’s Monetary Policy Outlook

• The RBI is expected to cut interest rates by 75-100 bps in the current cycle.
• Easing inflation could help bring headline inflation closer to the RBI’s 4% target.

Impact of US Tariffs on Trade

• India’s services exports to the US are expected to remain stable despite tariff changes.
• Tariff impact will be higher on goods-dependent economies like China, Malaysia, Singapore, and South Korea.