India’s economy poised for 6.5% growth in FY26

S&P Global raised India’s FY26 growth forecast to 6.5%, citing strong domestic demand, a normal monsoon, lower oil prices, and policy support. Despite global uncertainties, inflation is easing. RBI also projects 6.5% growth. In contrast, IMF and World Bank trimmed India’s outlook, citing trade tensions and global slowdown.

S&P Global Ratings has upgraded India’s GDP growth forecast for 2025-26 to 6.5%, reversing its earlier downgrade to 6.3% made in May. This marks the first upward revision by a major global agency for India’s growth in the current fiscal year. The revised outlook is supported by expectations of a normal monsoon, lower crude oil prices, income-tax concessions, and monetary easing.

The revision follows increased uncertainty around global crude prices, triggered by Iran-Israel tensions and the US bombing of Iran’s nuclear facilities. However, crude prices eased after a ceasefire announcement, with Brent falling 4.8% to US$67 per barrel.

Despite earlier concerns over US tariff policies and global economic spillovers, India’s growth has regained momentum, aided by resilient domestic demand, which S&P views as crucial for economies less reliant on exports.

In contrast, both the World Bank and the International Monetary Fund recently downgraded India’s FY26 growth outlook to 6.3% and 6.2%, respectively, citing the impact of global uncertainty and trade tensions. However, S&P sees falling energy prices, currency appreciation, and benign food inflation as helping to contain overall inflationary pressures in the near term.

The Reserve Bank of India has maintained a 6.5% growth forecast for FY26, driven by strong agricultural output, rural demand, and a resilient services sector, which are expected to boost urban consumption. The RBI has also cut its inflation projection by 30 basis points to 3.7%, expressing confidence that inflation will remain below the 4% target, supported by strong wheat and pulses production.

S&P’s broader Asia-Pacific outlook notes persistent external pressures, including US tariff uncertainty and sluggish Chinese imports. Nevertheless, domestic demand across the region is expected to remain healthy due to policy support.