Fitch ups India FY26 GDP forecast to 6.9% from 6.5% on domestic demand

Global rating agency Fitch has raised India’s gross domestic product (GDP) forecast for FY26 to 6.9% from 6.5%, citing robust domestic demand as the key growth driver. The agency highlighted that strong real income dynamics are supporting consumer spending, while looser financial conditions are expected to boost investment. Fitch noted that annual growth will moderate in H2FY26, easing to 6.3% in FY27 and further to 6.2% in FY28 as the economy operates slightly above its potential. The pace of economic activity accelerated sharply between Q1 and Q2 of 2025, with real GDP growth rising to 7.8% YoY, driven by stronger service sector growth at 9.3% YoY and higher consumption spending, both private and public.

At the global level, Fitch expects world GDP growth to moderate to 2.4% in 2025, down from 2.9% last year, though marginally higher than the June 2025 forecast. Growth projections were revised up for China to 4.7% from 4.2%, the Eurozone to 1.1% from 0.8% and the United States (US) to 1.6% from 1.5%. Fitch observed that US tariffs on India are likely to be negotiated lower, but uncertainties around trade relations may dampen investment sentiment. Domestic reforms, including Goods and Services Tax (GST) changes effective September 22, 2025, are expected to boost consumer spending modestly. Inflation is forecast to rise to 3.2% by the end of 2025 and 4.1% by end-2026, while the Reserve Bank of India (RBI) is expected to cut policy rates by 25 basis points later this year, maintaining them until end-2026, with a potential rate increase in 2027.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.