Fitch Ratings has upgraded India’s growth outlook for FY26 to 6.9 per cent from its earlier forecast of 6.5 per cent, as per a report by CNBC-TV18. The agency highlighted strong domestic demand, driven by robust consumer spending, as a key factor supporting growth.
According to ET Now, Fitch sees GST reform announced by Indian govt to modestly boost consumer spending and beyond. It also sees the Reserve Bank of India (RBI) cutting the repo rate by 25 basis points by the end of this year to support growth. However, it expects the RBI to begin raising rates again in 2027. Fitch expects inflation to average 3.2% by end-2025 and 4.1% by end-2026.
Fitch Ratings comes days after India’s Q1FY26 GDP Surpasses RBI Forecast
Fitch Ratings came out days after India released its Q1 FY26 GDP data. According to the data released by the National Statistics Office (NSO), India’s Gross Domestic Product (GDP) grew 7.8% in the April–June quarter of FY26, marking a five-quarter high. The GDP data surpassed the Reserve Bank of India’s forecast of 6.5%. This robust growth was primarily driven by a significant 9.3% expansion in the services sector, which includes trade, hotels, transport, and communication. The manufacturing and construction sectors reported growth rates of 7.7% and 7.6%, respectively.
Fitch Flags Risks Amid US Trade Tensions
According to Moneycontrol, Fitch Ratings has flagged risks from rising trade tensions with the US, which imposed an 50% tariff on imports from India in August. While the agency expects the duty to be negotiated down eventually, it warned that the uncertainty could weigh on investment sentiment.
Momentum Continues in Industry and Services
According to Moneycontrol, Fitch noted that PMI surveys and July industrial output indicate continuing momentum. The recent GST reforms, effective from September, are also expected to modestly boost consumer spending in FY26. The composite PMI index, an indicator of business activity, rose to a 17-year high in August, while industrial production climbed to a four-month high.
Growth Outlook for FY27–FY28
Fitch projects India’s GDP growth to ease to 6.3% in FY27 and 6.2% in FY28. Domestic demand is expected to remain the main driver, but the strong growth impulse seen in early FY26 is unlikely to be sustained through the second half of the year, the agency said.