S&P Global Ratings on Monday said India’s economy may expand by 6.5% in the current fiscal year and 6.7% in FY27, citing tax relief measures and monetary policy easing as key boosters for consumption-driven growth.
The agency noted that real GDP grew at its fastest pace in five quarters — 7.8% — in the April–June quarter of FY26. Official Q2FY26 GDP data will be released on November 28.
“We anticipate India’s GDP will grow by 6.5% in FY26 and 6.7% in FY27, with risks evenly balanced. Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs,” S&P said in its latest Asia-Pacific Economic Outlook.
The Reserve Bank of India (RBI) has projected a slightly higher 6.8% growth for FY26, an improvement from the 6.5% recorded in FY25.
What supportive measures were listed by S&P
S&P listed supportive measures that will aid GDP growth in FY26. Income-tax rebate raised to Rs 12 lakh (from Rs 7 lakh) in Budget 2025-26, delivering Rs 1 lakh crore in relief to the middle class.
The RBI has implemented three consecutive policy rate cuts in 2025, totaling 100 basis points (bps). These reductions in the repo rate—the RBI’s key policy rate—aim to support economic growth amid low inflation and global uncertainties like US tariffs. The repo rate now stands at 5.50%, down from 6.50% at the start of the year. GST rates slashed for around 380 items effective September 22, making mass-consumption goods cheaper.
S&P on US-India trade agreement
S&P added that a potential India–US trade agreement would reduce uncertainty, lift business confidence, and particularly benefit labour-intensive sectors.
However, the recent spike in effective US tariffs is weighing on export-oriented manufacturing. While there are signs Washington may ease tariffs on Indian products, the agency warned that the new US trade-policy approach is diverting government and corporate resources toward negotiating exemptions rather than boosting productivity.
Overall, S&P expects consumption to overtake investment as the primary growth driver in both FY26 and FY27.