Fitch Ratings Upgrades India’s FY26 Growth Forecast to 6.9%

Fitch Ratings has revised India’s GDP growth forecast for the fiscal year 2025–26 to 6.9%, up from the previous estimate of 6.5%. This adjustment follows a stronger-than-expected economic performance in the April–June quarter, where real GDP grew by 7.8% year-on-year, surpassing earlier projections.

Key Drivers of Growth

The agency attributes the upward revision to robust domestic demand, underpinned by strong real income dynamics and supportive financial conditions. These factors are expected to bolster consumer spending and facilitate investment, contributing to sustained economic expansion.

Global Trade Risks

Despite the positive outlook, Fitch highlights potential risks stemming from escalating trade tensions, particularly with the United States. The imposition of additional tariffs on Indian goods could dampen business sentiment and investment, posing challenges to the growth trajectory.

Inflation and Monetary Policy

Inflation remains subdued, with headline retail inflation at a six-year low of 1.6% in July, attributed to falling food prices and favorable monsoon rains. Fitch anticipates a 25 basis point rate cut by the Reserve Bank of India later in the year, with rates remaining stable through 2026 before a potential tightening in 2027.

Conclusion

Fitch’s upgraded growth forecast reflects India’s resilient economic performance and favorable domestic conditions. However, the agency cautions that external factors, such as global trade dynamics, could influence the country’s economic outlook in the coming months.