Fitch Projects India’s GDP Growth at 6.5% for FY26 Amid Global Trade Tensions
India’s Gross Domestic Product (GDP) is projected to grow by 6.5% in the fiscal year 2025-26 (FY26), with a slight deceleration to 6.3% in the following fiscal year. This outlook highlights the country’s relative insulation from aggressive global trade policies, particularly those driven by the United States.
India’s Economic Resilience
Despite growing global trade tensions, India remains “somewhat insulated” due to its limited reliance on external demand. While aggressive U.S. trade policies pose potential risks, India’s economic framework offers a degree of protection against such external shocks.
Recent Economic Performance
The Indian economy exhibited strong performance in the fourth quarter of 2024, with GDP growth climbing to 6.2% from 5.4% in the previous quarter. This improvement is attributed to higher public and private spending, alongside robust investment activity. Favorable monsoon conditions have also boosted agricultural production, enhancing kharif crop yields and supporting economic growth.
Investment and Corporate Sentiment
Corporate confidence remains high, with banking sector reports indicating sustained double-digit growth in private sector credit. The government continues to focus on infrastructure investment, with fiscal policies designed to support capital spending while maintaining a stable economic environment. Lower borrowing costs are expected to further stimulate investment in the coming years.
Consumer Sentiment and Inflation Trends
Although consumer sentiment has shown slight moderation, inflation trends indicate potential improvements in real income. Official employment indicators and business surveys suggest steady job creation, supporting workforce participation. Recent revisions in tax exemptions and income brackets are likely to boost disposable incomes, encouraging continued consumer spending, though at a slightly tempered rate.
Inflation and Monetary Policy Outlook
Consumer price inflation declined to 3.6% in February from 4.3% in January, mainly due to easing food prices. Forecasts suggest that food price trends will contribute to a further reduction in inflation, expected to average around 4.0% by the end of 2025 before edging up to 4.3% by December 2026. The Reserve Bank of India (RBI) has already initiated monetary easing, lowering the repo rate by 25 basis points to 6.25%. Additional rate cuts are anticipated, with the repo rate likely reaching 5.75% by December 2025, down from previous estimates.
Conclusion
Fitch Ratings’ projection of 6.5% GDP growth for India in FY26 highlights the country’s economic stability amidst global uncertainties. With strong investment activity, a resilient agricultural sector, and well-calibrated fiscal policies, India is expected to maintain its growth momentum, positioning itself as a key player in the global economic landscape.
