S-P Retains India’s FY26 GDP Forecast at 6.5 percent Cites Strong Domestic Demand

S&P Global Ratings: Economic Outlook 26 India.
1. Growth Forecast:

• S&P has maintained the growth rate of the GDP of India at 6.5 percent in the FY26.
• This is after registering a healthy Q1 FY26 expected growth of 7.8, which has a strong economic momentum.

2. Key Growth Drivers:

• Domestic Demand: The golden goose, driven by:
• Strong consumer expenditure which is enhanced by the recent income and goods and services tax cuts.
• Sustainable monsoon subsidizing the countryside.
• Further government expenditure on infrastructure.

3. Inflation & Monetary Policy:

• Inflation Forecast: Reduced to 3.2% as at FY26, largely because of declining food prices.
• Interest Rate Forecast: S&P believes that since inflation is already in the target level of the RBI, the rate reduction of 25 bps in the rest of FY26 will spur the economy to grow.

4. Global Risks:

• The fact that U.S. tariffs may increase and that its supply chain may get disrupted may affect the exports of India.
• Nonetheless, the low ratio of exports to GDP in India serves as a buffer to such global cross winds.