Global ratings agency S&P Global has retained its growth forecast for India at 6.8% in the current fiscal year, which is 40 basis points lower than RBI’s estimate, in the backdrop of modest urban demand.
For the next two fiscal years, FY26 and FY27, it has, however, reduced the growth estimate for the country by 20 basis points each, to 6.7% and 6.8% respectively.
“In India we see GDP growth easing to 6.8% this fiscal year as high interest rates and a lower fiscal impulse temper urban demand,” the agency said in a report.
“While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter,” it said.
On monetary policy, S&P Global expects the central bank to cut the repo rate only once in the current fiscal year. At present the repo rate stands at 6.5%.
“Consumer inflation is fueled by supply shocks in agriculture, which have driven up food prices. These shocks are linked to changing rainfall patterns and climate change-driven heat waves. Traditionally volatile and hard to predict, food inflation has become even more capricious lately,” S&P Global said, while adding that the RBI cannot ignore food inflation when considering rate cuts.
“Food items make up nearly 46% of the inflation basket and persistently high food inflation raises inflationary expectations,” it said.