India's GDP Expected to Rise by 6.5% in FY26; Anticipated Rate Cuts of 75-100 bps: S&P Global Ratings
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Synopsis
S&P Global Ratings predicts India's GDP growth at 6.5% for FY26 amid favorable conditions such as moderate inflation and supportive fiscal policies. Anticipated interest rate cuts by RBI may further stimulate discretionary spending, enhancing economic resilience in the Asia-Pacific region.
Key Takeaways
- India's GDP growth projected at 6.5% for FY26
- Normal monsoon and low crude prices expected
- Tax benefits and lower borrowing costs to boost consumption
- RBI anticipated to cut interest rates by 75-100 bps
- U.S. tariffs on China to impact regional economies
New Delhi, March 25 (NationPress) Demonstrating a strong economy in the Asia-Pacific region despite global uncertainties, India's GDP is projected to expand by 6.5 percent in the fiscal year concluding on March 31, 2026, according to S&P Global Ratings on Tuesday.
This forecast assumes that the forthcoming monsoon season will be typical and that commodity prices—particularly crude—will remain low,” stated the global financial institution in its recent quarterly economic review for Asia-Pacific economies.
“A decline in food inflation, the tax incentives introduced in the national budget for the fiscal year ending March 2026, and reduced borrowing costs will foster discretionary spending,” it further elaborated.
Since tariffs are typically imposed on goods, trade will show greater resilience in economies where a significant portion of exports is comprised of services. This applies to the Philippines and, notably, India.
Regarding interest rate adjustments, S&P Global Ratings anticipates that the Reserve Bank of India (RBI) will implement interest rate cuts of 75 basis points to 100 basis points in the current cycle.
“The moderation of food inflation and lower crude oil prices will bring overall inflation closer to the central bank's target of 4 percent during the fiscal year ending March 2026, alongside a contained fiscal policy,” the report highlighted.
In light of the various policy measures and external challenges facing the Asia-Pacific region, “the strength of our projections emphasizes the resilience of regional economies,” it noted.
However, the increased U.S. tariffs on Chinese exports will negatively impact its economy.
“We had factored in a 10 percent U.S. tariff in our November baseline, implying an effective U.S. tariff on Chinese exports of about 25 percent. The additional 10 percent levies will elevate the effective rate to approximately 35 percent. This will hinder China’s growth through reduced exports, investment, and other ripple effects,” the report stated.
The impact on GDP growth is expected to be most pronounced for Malaysia (due to semiconductors), Singapore (mainly from pharmaceutical products), and South Korea (primarily because of automobiles), it added.
