India’s FY26 Growth Forecast Raised to 6.5% by S&P Global Ratings

India’s FY26 Growth Forecast Raised to 6.5% by S&P Global Ratings

India’s FY26 growth forecast has been revised upward to 6.5% by S&P Global Ratings, up from its earlier estimate of 6.3%. The upward revision, announced in S&P’s latest Economic Outlook Asia-Pacific Q3 report, cites resilient domestic demand, a normal monsoon, softer oil prices, tax reliefs, and the likelihood of monetary policy easing as key growth enablers.

This is a significant boost to confidence in India’s economic trajectory, especially as other global institutions continue to project more conservative figures for FY2025-26.

Key Drivers of India’s FY26 Growth Forecast Upgrade

S&P Global’s latest report attributes the India’s FY26 growth forecast upgrade to the following major factors:

• Resilient Domestic Demand expected to cushion external slowdowns
• Normal Monsoon Assumptions to support rural income and consumption
• Lower Crude Oil Prices, reducing input and logistics costs
• Tax Concessions, boosting disposable income
• Room for Monetary Easing due to reduced inflation pressure

The report states: “Indeed, we see India’s GDP growth holding up at 6.5 per cent in fiscal 2026.”

Monetary Policy Support for Growth

S&P noted that the Asia-Pacific region, including India, now has more room for monetary easing as inflation risks are subsiding. The Reserve Bank of India (RBI), which had held rates steady through FY25, may adopt a more supportive stance in FY26.

This policy flexibility is expected to support credit availability and domestic spending, thereby reinforcing India’s FY26 growth forecast.

Previous Forecast Cut Due to Global Trade Risks

In May 2025, India’s FY26 growth forecast had been downgraded to 6.3% due to concerns over U.S. tariff policy and rising protectionism. That forecast was released in a report titled Global Macro Update: Seismic Shift in US Trade Policy Will Slow World Growth.

S&P had warned then that “there are no winners in a scenario of escalating protectionist policies.” However, the upgraded outlook in June reflects renewed confidence in India’s ability to withstand such external risks.

Domestic Demand Still the Core Engine

The report emphasizes that India’s FY26 growth forecast will remain primarily supported by domestic consumption, particularly from urban middle-class households and rural recovery following a normal monsoon.

India’s growth is less export-dependent compared to other Asia-Pacific economies, giving it an edge amid a fragile global trade environment.

Geopolitical Risks and Oil Prices: Caution Ahead

S&P also flagged risks that could potentially derail India’s FY26 growth forecast, particularly Middle East tensions that might trigger oil price spikes. A significant and sustained rise in energy costs would impact India’s import bill and consumer prices.

However, the agency added that such a scenario remains unlikely given the current global oil supply conditions and the strategic reserves of key economies.

India to Gain from Global Supply Chain Realignments

In its earlier May report, S&P stated that India stands to benefit from global trade realignments and supply chain diversification. As companies shift operations out of China and Southeast Asia, India’s investment climate, large workforce, and digital infrastructure place it in a prime position.

This structural tailwind aligns with India’s FY26 growth forecast remaining on an upward path, and supports long-term projections of India becoming the world’s third-largest economy by FY2030–35.

While S&P is bullish, other international bodies remain cautious:

• World Bank (June 2025): Maintains India’s FY26 growth at 6.3%, citing trade barriers
• IMF (April 2025): Lowered FY26 estimate to 6.2%, citing rising geopolitical tensions
• S&P Global Ratings (June 2025): Revised FY26 forecast up to 6.5%, based on internal demand

Despite the variations, India continues to lead the pack in global growth projections for large economies.

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