Fitch Ratings expects India’s GDP to grow at 6.5% in 2025-26, and at a slightly lower rate of 6.3% in 2026-27. “More aggressive-than-expected US trade policies are an important risk to our forecast, though India is somewhat insulated given its low reliance on external demand,” the ratings agency said in its ‘Global Economic Outlook – March 2025’ report.
Fitch’s FY26 forecast is 20 basis points (bps) lower than the Reserve Bank of India (RBI) forecast of 6.7%, but within the range predicted by the Economic Survey (6.3-6.8%). For FY25, the agency expects GDP to grow at 6.3%.
Fitch said that GDP growth recovered to 6.2% in Q3FY25 from 5.4% in Q2, with both private and public spending – including capital spending – driving the pick-up in the growth rate. “The contribution of agriculture to growth has increased over the financial year as above-average monsoon rains boosted kharif crop production,” it added.
Business confidence remains high and lending surveys point to continued double-digit growth in bank lending to the private sector, said Fitch. The Union Budget implies continued high levels of public capital expenditure, while we assess that the Budget will be broadly neutral for growth, it added. “These factors — together with a reduction in the cost of capital — underpin our expectation of a pick-up in capital spending for FY26 and FY27.”
In recent months, consumer confidence has edged down, and vehicle sales have eased significantly, the agency highlighted. Lower inflation will boost real incomes, and labour market indicators — both from official data and PMI survey data — point to steady employment growth and increased participation, Fitch noted.
Moreover, the Budget raised tax-free income allowances and revised tax brackets, which will raise post-tax incomes. “These factors will support consumer spending growth, albeit at a slower rate than this year,” said the agency.