Fitch sees India FY26 GDP growth 6.5%, expects activity to pick up Jan-Mar
This story was originally published at 10:54 IST on 19 March 2025
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--Fitch: Expect further pick-up in India GDP growth in Jan-Mar
--Fitch: India FY26 Budget broadly neutral for growth
--Fitch: See India FY26 GDP growth at 6.5%, FY27 at 6.3%
--Fitch: See capex rising in India in FY26, FY27 as business confidence high
--Fitch: See capex rising in India in FY26, FY27 on lower cost of capital
--Fitch: India somewhat insulated from US trade policies
--Fitch: Expect 2 more rate cuts in India in 2025
NEW DELHI – India's economic growth is likely to stand at 6.5% in 2025-26 (Apr-Mar), before slowing down marginally to 6.3% in FY27, Fitch Ratings said. India's GDP is seen expanding at a four-year low pace of 6.5% in the current year, as per the government's second advance estimate, but Fitch expects growth in FY25 to be lower at 6.3%.
Fitch's projection for GDP growth in FY26 is lower than Reserve Bank of India's forecast. The central bank has projected the Indian economy to grow 6.7% in FY26, while the government pegged growth at 6.3-6.8% in the Economic Survey. On Monday, the Organisation for Economic Cooperation and Development said it expects India's GDP to grow 6.4% in FY26, 50 basis points lower than previously expected.
GDP growth recovered to 6.2% in Oct-Dec from a seven-quarter low of 5.6% in Jul-Sept. Fitch expects a further pick-up in GDP growth in Jan-Mar to 7.1%. "Business confidence remains high and lending surveys point to continued double-digit growth in bank lending to the private sector," Fitch said in its Global Economic Outlook report for March.
"The Union Budget implies continued high levels of public capital expenditure, while we assess that the budget will be broadly neutral for growth. 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," the rating agency said.
Consumer spending, which has moderated in recent months, will remain supported next year from the tax breaks announced in the FY26 Budget, Fitch said. However, the rate of increase in consumer spending in FY26 would be lower than the current year, it added.
The big risk to the growth forecast for India comes from the "more aggressive-than-expected" US trade policies, Fitch said. However, India is somewhat insulated from US tariff actions "given its low reliance on external demand", the rating agency said.
Fitch sees CPI inflation in India at 4.0% by end-2025 on the back of a fall in food prices, before rising slightly to 4.3% by December 2026. CPI inflation fell to a seven-month low of 3.61% in February. This was the first inflation print below the RBI's medium-term target of 4% in six months and economists expect headline CPI to remain lower than 4% in March as well.
The rating agency expects the RBI's Monetary Policy Committee to lower the repo rate by another 50 bps, taking policy rate to 5.75% by December. The MPC lowered the repo rate by 25 bps in February to 6.25% in the first rate cut in nearly five years. End
Reported by Shubham Rana
Edited by Avishek Dutta
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