S&P Global Ratings on Monday lowered its economic growth estimates for India over the next two financial years, citing high interest rates and reduced fiscal spending as factors slowing urban demand.
The ratings agency now projects India’s GDP to grow 6.7% in the 2025-26 financial year and 6.8% in 2026-27. These figures are down from its earlier estimates of 6.9% and 7% for the respective years. For the current fiscal year ending March 2025, the growth forecast stands at 6.8%.
"In India, GDP growth is expected to ease to 6.8% this fiscal year as high interest rates and lower fiscal impulse temper urban demand,” S&P said in its report. “While purchasing manager indices remain in expansion territory, other high-frequency indicators suggest a temporary slowdown, particularly in the construction sector during the September quarter.”
The agency retained its projection for India’s GDP to grow 7% in the 2027-28 fiscal year.
S&P also revised its economic outlook for China, holding steady its 2024 growth forecast at 4.8% but lowering its 2025 estimate to 4.1% from 4.3%. It further cut its 2026 forecast to 3.8% from 4.5%, citing challenges arising from potential US tariff increases and shifting global trade dynamics.
“The impending change in the US administration will pose challenges for China and the broader Asia-Pacific region,” said Louis Kuijs, S&P Global Ratings’ Asia-Pacific Chief Economist. “US tariff hikes, particularly targeting China, are likely, while evolving US macroeconomic policies are shaping new interest rate expectations.”
S&P’s report, titled Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon, said the Asia-Pacific region will face slower global demand and trade policy uncertainties. However, easing inflation and lower interest rates may provide some relief by boosting household spending power.
China’s stimulus measures are expected to mitigate some of the impact of US tariffs, but overall growth in the Asia-Pacific region remains constrained by these external pressures.
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