S&P Global Ratings on Wednesday raised India’s GDP growth forecast for the next fiscal to 7.1%. It said that private consumption, investment and exports will be key drivers, but the conflict in the Middle East could strain the fiscal position due to higher energy prices.
S&P has revised the 2025-26 growth upwards by 0.4 percentage points to 7.6 per cent, and for 2026-27 fiscal by 0.2 percentage points to 7.1 per cent.
“We project real GDP growth to moderate to 7.1 per cent in the fiscal year ending in March 2027, compared with 7.6 per cent in fiscal 2026. Key drivers are resilient private consumption, a modest recovery in private investment, and solid exports,” the report said.
Further, the S&P expected the inflation to rise to 4.3 per cent in fiscal 2027 as it normalises from low levels.
Ahead of the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting, the S&P expected the central bank to hold rates steady and maintain a neutral stance. The ongoing Middle East conflict will weigh on the Asia Pacific region’s economies with many of the nations being major net energy importers relying heavily on Middle East supply, it said. “We would expect one 25 bps rate hike in the second half,” S&P said.
“Higher energy prices erode purchasing power and depress domestic demand. In countries such as India, Indonesia, Japan, Malaysia, and Thailand, higher prices will force greater spending on subsidies and thereby strain fiscal positions,” it added.
In a separate development, Goldman Sachs has pared its growth estimate for India for 2026, while forecasting a 50 basis points hike in policy rates.
Goldman forecasts the Indian economy will grow by 5.9 per cent in calendar year 2026 compared to its pre-Iran war forecast of 7 per cent, it said in a report.