Fitch Ratings has revised its economic outlook for India, adjusting its FY26-27 GDP growth forecast to 6.3 pc, up from the earlier projection of 6.2 pc. The agency retained its FY25-26 estimate at 6.5 pc, citing strong domestic fundamentals despite global trade risks stemming from U.S. policies.
In its latest Global Economic Outlook report, Fitch highlighted India’s relative insulation from external trade shocks due to its self-sufficiency. While aggressive U.S. trade measures pose a risk, India’s low reliance on external demand is expected to cushion any major impact.
Fitch also anticipates two additional policy rate cuts this year, bringing the key rate down to 5.75 pc by December 2025 from the current 6.25 pc. The Reserve Bank of India (RBI) had already lowered the rate by 25 basis points in February.
India’s economic performance remains robust, with GDP growth reaching 6.2 pc in Q4FY25, up from 5.4 pc in the previous quarter.
The report attributes this acceleration to strong private and public spending, increased capital investments, and a favourable monsoon boosting agricultural output. Fitch expects GDP growth to reach 6.3 pc for the full financial year ending March 2025.
Business confidence remains high, with bank lending to the private sector growing at a double-digit rate. The Union Budget’s continued focus on public capital expenditure is expected to sustain economic momentum.
Fitch also foresees a rise in capital spending over the next two years, supported by declining capital costs following RBI’s projected rate cuts.
Consumer confidence has seen a slight dip in recent months, particularly reflected in lower vehicle sales. However, easing inflation is expected to support real incomes and improve spending capacity.
Government employment data and PMI surveys suggest stable job growth, further bolstering the economic outlook.
India’s net exports have contributed positively to GDP growth, driven by strong export performance and reduced imports. Fitch predicts that this contribution will stabilise, with net exports having a neutral impact in FY25-26 and FY26-27.
Inflation has moderated, with consumer price inflation dropping to 3.6 pc in February from 4.3 pc in January, mainly due to easing food prices.
Fitch expects inflation to gradually decline to 4 pc by the end of 2025 before experiencing a mild rise to 4.3 pc by December 2026, coinciding with the anticipated RBI rate cuts.
Follow us
