GDP growth likely to hold at 6.5% in FY25-26, says S&P

India’s economic growth is expected to remain steady at 6.5% in 2025-26, supported by strong domestic demand, according to the latest Asia-Pacific Economic Outlook released by S&P Global Ratings on Monday. The agency expects growth to accelerate slightly to 6.7% in 2026-27, with risks “evenly balanced.”S&P noted that India’s momentum will continue to be driven primarily by robust consumption, even as higher US tariffs weigh on export-oriented manufacturing. “Domestic growth remains resilient despite the impact of US tariffs,” the agency said.
India’s GDP expanded by 7.8% in the April–June quarter, while the RBI has projected 7% growth for July–September. Growth is expected to moderate in the second half of the fiscal, but S&P believes the economy will maintain pace similar to last year despite external pressures.The report highlighted that the recent 50% US tariff imposed on most Indian goods since August 27 is dampening manufacturing expansion. However, ongoing India–US trade discussions could ease tariff burdens. “A successful trade agreement would reduce uncertainty and bolster labour-intensive sectors,” S&P said.
Domestic policy support is also expected to aid consumption. Lower GST rates, combined with income tax cuts and interest rate reductions, are likely to strengthen household spending, making consumption a larger driver of growth than investment this year and next.On inflation, S&P has revised its CPI forecast to 2.5% for the current year due to softer-than-expected food prices. Headline inflation, however, is projected to rise to 5% in 2026-27, before easing modestly in subsequent years.The agency also flagged pressures on the Indian rupee, which recently touched a record low of Rs89.49 per dollar, citing capital outflows and heightened uncertainty stemming from US tariffs and the ongoing absence of a trade agreement.

(Business Correspondent)