S&P Global Maintains India's FY26 Growth Estimate at 6.5%, Expects RBI Rate Cut Soon

New Delhi, September 23, 2025 – S&P Global Ratings reaffirmed its growth forecast estimate regarding India’s GDP at 6.5 percent in the ongoing fiscal year (FY26). The main causes that drive this growth is a rising robust domestic demand and favorable economic conditions. The rating agency said India’s economy grew 7.8 percent in the April–June quarter and anticipates the growth momentum to sustain until March 2026.

Domestic Demand Driving Growth

S&P pointed out that strong domestic demand will be the growth driver in FY26. A generally benign monsoon, reductions in income tax and the goods and services tax (GST), and pickup in government spending are likely to drive consumption and investment trends despite challenges from the external environment. These elements, in the agency’s view, will assist in sustaining stable economic momentum even as uncertainties globally prevail.

Inflation Outlook and RBI Policy

The credit rating agency lowered its inflation forecast to 3.2 percent for FY26, citing the moderation due to a steeper-than-anticipated decline in food prices. With inflation in check, S&P expects the Reserve Bank of India (RBI) to reduce interest rates by 25 basis points during the year, opening up space for additional monetary easing and aiding sustained expansion.

Global Context and External Risks

In its Economic Outlook Asia-Pacific Q4 2025: Growth To Ease On External Strain report, S&P observed that while Asian domestic demand remains quite robust, global headwinds are mounting. Rising US import tariffs and weakening global growth are restructuring trade flows and regional supply chains. Relative to previous expectations, India has been more impacted by the rise in US tariffs than anticipated, while China has been resilient and Southeast Asian markets have had mixed effects.

Outlook

S&P highlighted that growth in India continues to remain strong in spite of external pressures, with domestic consumption and government expenditure as stabilizing forces. External sector risks could be posed by continued global trade tensions as well as currency fluctuations. Investors and policymakers will closely watch inflation trends and RBI policy shifts, as these will determine both market sentiment and credit conditions.

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