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Informist, Monday, Nov. 24, 2025

 

NEW DELHI – S&P Global Ratings has left its forecast for India's GDP growth in the current financial year unchanged at 6.5%, with consumption-driven domestic growth seen robust in the face of US tariffs. The rating agency also left the GDP growth forecasts for the next three financial years unchanged at 6.7%, 7.0%, and 6.8%, respectively.

 

"Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs," S&P said in its Asia-Pacific economic outlook for Jan-Mar. "If India can secure a trade agreement with the US, it will reduce uncertainty and enhance confidence, which would boost labor-intensive sectors."

 

S&P's growth forecast for FY26 is lower than the Reserve Bank of India's projection of 6.8%. The government's Chief Economic Adviser V. Anantha Nageswaran last month said India's GDP may grow over 6.8% in 2025-26 (Apr-Mar). In October, the International Monetary Fund raised its forecast for India's FY26 GDP growth by 20 basis points to 6.6%. The Indian economy grew 6.5% in FY25 and 7.8% in the June quarter of the current year. 

 

Lowered goods and services tax rates will support middle-class consumption in India and complement the income tax cuts and interest rate reductions introduced this year, S&P said. "These changes are likely to make consumption a greater driver of growth compared with investment, in this fiscal year, and the next."

 

The RBI's Monetary Policy Committee has reduced the policy repo rate by 100 bps in 2025 so far and the panel is expected to cut rates by 25 bps in December to support economic activity while inflation stays low. In February, the government had announced income tax breaks, which were followed by rationalisation of GST rates in September, to aid the economy suffering from 50% tariffs imposed by the US. 

 

S&P lowered its CPI inflation forecast for FY26 to 2.5% from 3.2% as food inflation remains lower than anticipated. "However, we expect food inflation to normalise and forecast about 5% headline inflation the next fiscal year," the rating agency said. CPI inflation fell to a record low of 0.25% in October and the RBI sees it averaging 2.6% during the financial year.

 

High US tariffs and lack of a trade deal so far have also weighed on the Indian rupee, along with capital outflows. While the central bank has maintained a tight grip on the currency, keeping it from depreciating sharply, the rupee Friday fell below the psychologically crucial 89-per-dollar mark to a record low of 89.4950 a dollar. S&P projects the rupee to rise against the dollar by the end of FY26 to 88.0 and depreciate gradually to 90 a dollar by FY28 and 91 a dollar by FY29.  End

 

US$1 = INR 89.18

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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