S&P Global: India's growth likely to moderate to 6.6% on energy stress

India’s economic growth is expected to slow to 6.6% in the current financial year from 7.7% recorded in the previous year, as weak monsoon conditions, energy-related pressures and a slowdown in global growth weigh on economic activity, rating agency S&P Global said.
In its report titled *“Economic Outlook Asia-Pacific Q3 2026: AI-Exposed Markets to Outperform”*, S&P Global highlighted rising uncertainty around the ongoing Middle East conflict and its potential impact on commodity prices, supply chains, global economies and credit conditions.
According to the agency the duration and intensity of the geopolitical tensions remain unpredictable, creating risks for economies dependent on energy imports.“India’s GDP growth would be affected by weaker global demand, higher energy costs and domestic factors such as sub-par monsoon conditions,” S&P Global noted.The agency also revised growth projections for several major Asia-Pacific economies, saying the impact of higher energy prices, reduced purchasing power, weaker capital expenditure and negative wealth effects would weigh on economic expansion.“GDP growth would be 1.0-1.3 percentage points lower in China, India and Japan in the third quarter of 2026, with year-average growth 0.5-0.6 percentage points lower,” the report said.S&P Global’s GDP growth forecast for India matches the Reserve Bank of India’s latest estimate of 6.6%. However, the agency expects India’s growth momentum to recover in the coming years, projecting GDP expansion at 7.2% in FY2027-28, followed by 7% and 6.8% growth in the subsequent two financial years.
Inflation, Rate Hike Risks
On inflation, S&P Global expects India’s retail inflation, measured by the Consumer Price Index (CPI), to rise sharply to 5.1% in the current financial year from 2.1% in the previous year.The agency attributed the expected increase to higher energy costs being passed on to consumers by manufacturers, along with recent increases in administered prices of petrol, diesel and cooking gas.
“We project consumer inflation will rise to 5.1% this fiscal, as manufacturers pass on higher energy costs to consumers, alongside recent increases in administered prices,” S&P Global said.Inflation is projected to moderate gradually to 4.7% in FY2027-28, 4.3% in FY2028-29 and 4.2% in FY2029-30.S&P Global also expects a monetary policy tightening cycle, forecasting a policy rate hike in the second half of the current financial year. The agency said a widening current account deficit and a weakening rupee prompted authorities to take measures to encourage foreign capital inflows. “These measures have strengthened the rupee vis-a-vis the US dollar somewhat,” it added.
Oil Prices and Global Trade Outlook
For its projections, S&P Global assumed that disruptions in the Strait of Hormuz would gradually ease in the second half of the year. However, global oil prices are expected to remain elevated in the near term before gradually returning to pre-crisis levels by early 2028.The agency noted that technology-driven exports would provide support to several Asia-Pacific economies, with countries such as Taiwan, South Korea, Vietnam, Singapore, China, Malaysia, Thailand and Japan expected to benefit from the global tech export boom.
However, non-technology exports are likely to remain under pressure due to slower global growth, reduced purchasing power in key markets amid higher energy prices and renewed US trade tariff measures. S&P Global said economies with strong exposure to technology manufacturing are better positioned to absorb the impact of energy shocks, while other sectors may continue to face challenges from global uncertainties.

(Business Correspondent)