Is India Set for a GDP Growth of 6.5% in FY26?

New Delhi, June 24 (NationPress) India is expected to experience a GDP growth of 6.5% for the current fiscal year (FY26), driven by strong domestic demand, favorable monsoon conditions, and accommodative monetary policies, as stated in a recent report by S&P Global Ratings.

The resilience of domestic demand plays a crucial role in mitigating economic slowdowns, particularly for economies like India that are less reliant on goods exports.

According to the report, “We anticipate India’s GDP growth to sustain at 6.5% in fiscal 2026 (ending March 31, 2026). This prediction is based on expectations of a normal monsoon, decreased crude oil prices, income tax relief, and monetary easing.”

Additionally, the decline in food inflation significantly contributes to keeping headline inflation in check.

As reported, the annual inflation rate based on the Wholesale Price Index (WPI) fell to a 14-month low of 0.39% in May, down from 0.85% in April and 2.05% in March.

Furthermore, the Consumer Price Index (CPI) inflation rate dropped to 2.82% in May compared to the same month last year, marking the lowest level of retail inflation since February 2019.

Food inflation also saw a notable decline to 0.99% in May, the lowest since October 2021. This marks the seventh consecutive month of decreasing food inflation due to rising agricultural output.

The Reserve Bank of India (RBI) has adjusted its inflation forecast for 2025-26 downwards, revising it from an earlier estimate of 4% to 3.7%, according to Governor Sanjay Malhotra. The significant drop in inflation has facilitated a reduction of 50 basis points in the repo rate, now set at 5.5%, to stimulate economic growth in the recent monetary policy review.

S&P Global Ratings noted that numerous regional economies began 2025 on a positive note due to strong domestic demand, with some benefitting temporarily from a surge in exports to the U.S. in anticipation of potential tariffs. In India, growth rebounded following a period of stagnation.

The report projects a 4.3% GDP growth for China in 2025 and 4.0% in 2026.

“While this is considerably below the government’s target for this year, it represents a solid outcome considering external pressures. Chinese imports are expected to remain subdued this year and next, but not as weak as exports,” the report indicated.

Economies in the Asia-Pacific region face substantial external challenges, particularly due to uncertain U.S. tariff policies and sluggish imports from China.

“We anticipate domestic demand to generally stay robust, partly due to policy easing. However, the impact on the resilience of regional economies varies significantly, with those reliant on exports being less well positioned,” the report concluded.