S&P Global Ratings on Tuesday raised India’s economic growth projection to 6.5% for 2025-26. This follows a cut in the country’s growth outlook to 6.3% by the agency last month. This is the first upward revision of India’s growth for the current fiscal by a major agency.
S&P assumed a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing, while making the revised projection. However, it came close on the heels of the heightened uncertainty to global crude prices after the Iran-Israel tensions and the US bombing of Iran’s nuclear facilities.
On May 2, the global rating agency had cut India’s growth projections from 6.5% to 6.3% for 2025-26, citing uncertainty over the US tariff policy and downside risks from its spillover to the economy.
“In India, growth picked up after a soft patch,” it said, adding that domestic demand resilience is particularly relevant in limiting the economic slowdown in economies less exposed to goods exports, such as India.
In April, the World Bank cutIndia’s growth projection by 40 bps to 6.3% for 2025-26, as the benefits to private investment from monetary easing and regulatory streamlining were expected to be offset by global economic weakness and policy uncertainty. The International Monetary Fund had also cut India’s growth projection by 30 basis points (bps) to 6.2% for FY26, citing higher trade tensions and global uncertainty.
Recent falls in global energy prices and currency appreciation against the US dollar will dampen price increases in the months ahead, S&P said.
The benchmark Brent crude prices fell 4.8% to around $67 a barrel on Tuesday after US president Donald Trump announced that Israel and Iran have agreed to a complete and total ceasefire.
“In India, falling food inflation also helps contain headline inflation. Across the region, redirection of exports away from the US will weigh on price increases,” S&P said in its latest Economic Outlook Asia-Pacific.
The Reserve Bank of India has forecast 6.5% growth for the country in FY26, noting strong agricultural sector growth and rural demand, and a resilient services sector underpinning a recovery in urban demand. RBI has lowered its inflation forecast by 30bp to 3.7% for FY26. The governor recently highlighted that there is “greater confidence of headline inflation remaining below the target of 4% over the course of the year”. Food inflation is likely to remain benign given higher wheat and pulses (legumes) production.
S&P Ratings said Asia-Pacific economies face sizable external pressure, notably from uncertain US tariff policy and soft imports in China.
“We expect domestic demand to broadly remain healthy, in part because of policy easing. But what this means for the resilience of regional economies varies widely, with export-dependent ones less well placed,” it said.
It has projected 4.3% GDP growth in China in 2025 and 4% in 2026. While this is significantly lower than the government’s target for this year, it would be a solid result given the external strains. Chinese imports will be subdued this year and next, but not as weak as exports, it added.