S&P Global retains India’s growth forecast at 6.5% for FY26

S&P Global Ratings retained India’s gross domestic product (GDP) forecast at 6.5 per cent for the Financial Year 2025-26, riding on the back of strong demand, increasing investment, and tax reforms.

“We forecast India’s GDP growth to hold steady at 6.5 per cent this financial year. We expect domestic demand to remain strong, supported by a largely benign monsoon season, cuts in the income and the goods and services tax (GST), and accelerating government investment,” it said in its report titled ‘Economic Outlook Asia-Pacific Q4 2025: Growth To Ease On External Strain’.

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S&P further revised India’s inflation outlook downward. “We have revised our inflation forecast down to 3.2 per cent for FY26 after a sharper-than-expected decrease in food inflation,” it said.

The ratings agency further said the US tariffs on imports from different Asian economies will shape both their export outlook and their role in regional supply chains.

“Relative to our June assumptions on US tariffs, India has been hit much harder than expected, and the region’s developed economies broadly as expected,” it said, adding that China has fared better than other Asian economies.

Higher US tariffs and the associated uncertainty will weigh on exports and growth, S&P said. The uncertainty, lack of detail, and exceptions cloud any estimate of new effective US tariffs, it added.

Further, the report also mentioned that low inflation provides room for further monetary policy adjustments, with S&P expecting a 25-basis-point (bps) rate cut by the Reserve Bank of India (RBI) in FY26.