Has Fitch Enhanced India's GDP Growth Forecast to 7.4% for FY26?
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Synopsis
Fitch Ratings has revised its GDP growth forecast for India to 7.4% for FY26, citing strong domestic demand and tax reforms as key drivers. This significant adjustment highlights India's economic resilience amidst challenges, with expectations of a slight slowdown in FY27. Discover the implications of these projections on India's economic landscape.
Key Takeaways
- India's GDP growth forecast for FY26 is now at 7.4%.
- Private consumption is a significant driver of growth.
- Inflation is projected to average 1.5% this fiscal year.
- The RBI may lower rates further to 5.25%.
- Global growth forecasts have been slightly raised.
New Delhi, Dec 4 (NationPress) Fitch Ratings has upgraded its forecast for India's GDP growth for FY26 to 7.4 percent, revising it from an earlier estimate of 6.9 percent, fueled by strong domestic consumption and tax reforms. The international rating agency pointed out that private consumer expenditure is the primary catalyst for growth this fiscal year, backed by solid real income trends, improved consumer confidence, and the effects of the recently instituted goods and services tax reforms.
For FY27, Fitch anticipates a decline in India’s growth to 6.4 percent, with domestic demand continuing to be the major driver. The agency predicts a slowdown in public investment growth but expects a rebound in private investment during the latter half of FY27.
India's real GDP growth spiked by 8.2 percent in the July-September quarter of 2025-26.
Despite facing one of the highest effective tariff rates on exports to the US at approximately 35 percent, Fitch noted that an India-US trade agreement could enhance external demand.
Fitch forecasts that inflation in India will average 1.5 percent this fiscal year, with consumer inflation dropping to 0.3 percent as of October.
The easing inflation is expected to provide the Reserve Bank of India (RBI) with the opportunity for one more rate reduction on December 5, lowering the policy rate to 5.25 percent. Fitch believes the RBI has reached the end of its easing cycle and will maintain stable rates over the next two years.
The upcoming three-day Monetary Policy Committee meeting coincides with historically low inflation and a rapidly rising GDP.
The global rating agency also predicts that the rupee will strengthen next year to about 87 per dollar.
Additionally, Fitch has slightly raised its global growth projections for 2025 since the June Global Economic Outlook (GEO) due to better-than-expected data from the second quarter of 2025.
However, signs of an underlying slowdown in the US economy are emerging in 'hard' economic data, while positive developments in eurozone growth partially stem from US tariff adjustments. Fitch continues to foresee a noticeable deceleration in global GDP this year.
Point of View
I recognize that Fitch Ratings' adjustment of India's GDP growth forecast underscores the country's economic potential. While global challenges persist, India's resilience is evident through strong domestic demand and strategic reforms. However, we must remain vigilant about external factors, especially trade dynamics, that could influence our economic trajectory.
NationPress
04/12/2025
Frequently Asked Questions
What is Fitch Ratings' new GDP growth forecast for India?
Fitch Ratings has revised its GDP growth forecast for India to 7.4% for FY26.
What factors contributed to this revision?
The revision is primarily attributed to strong domestic demand and effective tax reforms.
What does Fitch anticipate for India's growth in FY27?
Fitch expects India's growth to moderate to 6.4% in FY27, driven mainly by domestic demand.
How is inflation expected to trend in India?
Fitch projects that inflation in India will average 1.5% this fiscal year.
What is the expected future of the Indian rupee according to Fitch?
Fitch expects the rupee to strengthen to around 87 per dollar next year.
