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S&P Global has revised India’s FY26 GDP growth forecast to 6.5%, up by 20 basis points, citing expectations of a normal monsoon, easing crude oil prices, and resilient domestic demand.
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A projection of a better monsoon prompted S&P Global on Tuesday to raise India’s growth forecast by 20 basis points to 6.5% for the current fiscal year 2025–26.
In its report on the economic outlook for Asia Pacific, S&P Global said that many regional economies had a good start to 2025 due to robust domestic demand. Several got a temporary fillip from frontloading exports to the U.S. ahead of anticipated tariffs. In India, “growth picked up after a soft patch,” it said.
Further, domestic demand resilience is particularly relevant in limiting the economic slowdown in economies less exposed to goods exports, such as India. Indeed, “we see India’s GDP growth holding up at 6.5% in fiscal 2026 (year ending March 31, 2026). That forecast assumes a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing,” it said.
S&P Global’s projection is at par with the Monetary Policy Committee’s (MPC) estimate. Earlier this month, the Committee said that going forward, economic activity continues to maintain momentum in 2025-26, supported by private consumption and traction in fixed capital formation. The sustained rural economic activity bodes well for rural demand, while continued expansion in the services sector is expected to support the revival in urban demand. Investment activity is expected to improve in light of higher capacity utilization, improving balance sheets of financial and non-financial corporates, and the government’s capital expenditure push.
Trade policy uncertainty continues to weigh on merchandise export prospects, while the conclusion of the free trade agreement (FTA) with the United Kingdom and progress with other countries supports trade activity. On the supply side, agriculture prospects remain bright on the back of an above normal south-west monsoon forecast and resilient allied activities. The services sector is expected to maintain its momentum. However, spillovers emanating from protracted geopolitical tensions and global trade and weather-related uncertainties pose downside risks to growth. Taking all these factors into account, “real GDP growth for 2025-26 is projected at 6.5 per cent,” MPC said while adding that the risks are evenly balanced.
The Committee cut inflation forecast for FY 26 at 3.7 per cent. Data for May showed retail inflation based on the Consumer Price Index at 2.82 per cent, which is 75 months low. However, core inflation is rising, but still, agencies are not raising the headline inflation number. S&P Global, too said, that inflation has generally receded even as sequential core inflation has risen in Indonesia, Malaysia and India in recent months. Recent falls in global energy prices and currency appreciation against the U.S. dollar will dampen price increases in the months ahead, even considering the recent rise in the oil price amid Middle East turmoil.
“In India, falling food inflation also helps contain headline inflation. Across the region, redirection of exports away from the U.S. will weigh on price increases,” it said.
Asia Pacific Growth
Talking about the growth scenario in the entire region, the agency said that these economies face sizable external pressure, notably from uncertain U.S. tariff policy and soft imports in China. “We expect domestic demand to broadly remain healthy, in part because of policy easing. But what this means for the resilience of regional economies varies sharply, with export-dependent ones less well placed,” it said. On China, the agency noted that U.S. tariffs are hitting China’s exports. Still, relatively resilient domestic demand should contain the economic slowdown. “We expect China’s GDP growth to be 4.3 per cent in 2025 and 4 per cent in 2026,” it said.
Published on June 24, 2025
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