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Informist, Thursday, Dec. 4, 2025

 

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--Fitch: Raised India FY26 growth forecast to 7.4% from 6.9?rlier 
--Fitch: Private consumer spending main driver of India's growth in FY26 
--Fitch: Expect India's GDP growth to slow to 6.4% in FY27 
--Fitch:India public investment growth to ease FY27 amid tight fiscal policy 
--Fitch: India pvt investment to pick up in H2 FY27 as fincl conditions ease 
--Fitch: See India growth easing to 6.2% in FY28 
--Fitch: Base effects to push CPI inflation above RBI target by end 2026 
--Fitch: Falling inflation should give RBI room for one more rate cut in Dec 
--Fitch: Expect interest rates in India to stay at 5.25% for next two years 
--Fitch: See India rupee at 88.50/$1 Dec-end, 87.00/$1 end 2026 

 

NEW DELHI – Fitch Ratings has raised its forecast for India's GDP growth in the current financial year to 7.4% from 6.9?ter the economy expanded more than expected in the September quarter. Growth is expected to ease over the second half of FY26, which should allow the Reserve Bank of India to lower interest rates on Friday, especially as CPI inflation is at a historical low, the rating agency said.

 

Government data released last week showed India's GDP grew at a six-quarter high pace of 8.2% in the September quarter, much higher than expectations. The strong GDP growth print has pushed economists to raised their FY26 growth forecasts to around 7.5% and the RBI is expected to revise its projection higher as well on Friday from the current 6.8%. 

 

Fitch expects GDP growth to ease to 6.4% in FY27, with public investment growth seen easing amid relatively tight fiscal policy, the rating agency said. 

 

"Private consumer spending is the main driver of growth this year, supported by strong real income dynamics, increased consumer sentiment, and the impact of recently implemented goods and services tax reforms," Fitch said in its Global Economic Outlook. Domestic demand driven by private consumer spending will remain the main growth driver in FY27 and private investment should pick up in the second half of next year as financial conditions loosen, the rating agency said. 

 

For FY28, Fitch expects India's growth to ease to 6.2% as higher imports offset slightly stronger domestic demand growth. "India faces one of the highest ETRs (effective tariff rate) on its exports to the US (about 35%); a trade agreement with the US that lowers the ETR would boost external demand," the rating agency said.

 

CPI inflation, which fell to a record low of 0.25% in October, is seen rising above the RBI's 4% target by the end of 2026 because of base effects, Fitch said. Retail inflation has declined sharply in FY26, thanks to lower food prices and favourable base effects. The RBI projects CPI inflation in FY26 at 2.6% but economists expect it to average even lower at around 2%.

 

Low inflation should give the RBI's Monetary Policy Committee room for one more policy rate cut in December to 5.25%, following 100 basis points of cuts in 2025 so far, Fitch said. "With core inflation recovering and activity projected to remain strong, we expect the RBI has reached the end of its easing cycle, and that rates will remain at 5.25% over the next two years."

 

The rating agency projected the rupee to rise to 88.50 a dollar by the end of December and further to 87.00 a dollar by the end of 2026. The Indian rupee fell below 90 against the dollar for the first time Wednesday and hit a record low of 90.42 Thursday. India's Chief Economic Adviser V. Anantha Nageswaran Wednesday said he wasn't worried about the rupee's fall and the Indian currency was expected to "come back" next year. The rupee has depreciated nearly 5.5% against the dollar in 2025, making it the worst performing Asian currency this calendar year.  End

 

US$1 = INR 90.29

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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