S&P Retains India’s FY26 GDP Forecast at 6.5%, Sees RBI Rate Cut Likely

S&P Global Ratings on Tuesday, September 23, 2025, maintained India’s GDP growth forecast at 6.5% for the current fiscal year ending March 31, 2026. The rating agency cited robust domestic demand, supported by a largely benign monsoon, tax cuts, and rising government investment, as key drivers of growth.

India’s economy expanded 7.8% in the April-June quarter, underscoring strong domestic consumption. “We forecast India’s GDP growth to hold steady at 6.5% this fiscal year. Domestic demand is expected to remain resilient, backed by a favourable monsoon, reductions in income and goods and services tax, and accelerating government spending,” S&P stated.

Inflation Outlook and RBI Rate Cut

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S&P also revised its inflation projection for India downward to 3.2% for the fiscal year, citing a sharper-than-expected drop in food prices. The lower inflation trajectory, the agency said, provides scope for further monetary policy easing. “This leaves room for additional adjustments, and we anticipate a 25-basis-point rate cut by the Reserve Bank of India this fiscal year,” S&P added.

Regional Context and External Pressures

In its Economic Outlook Asia-Pacific Q4 2025: Growth To Ease On External Strain report, S&P highlighted that resilient domestic demand across the region should mitigate the effects of rising external challenges, including slower global growth and higher U.S. import tariffs.

The report noted that U.S. tariffs on imports from various Asian economies will influence both export prospects and regional supply chain roles. “Relative to our June assumptions on U.S. tariffs, China has so far performed somewhat better than other Asian economies, while Southeast Asian emerging markets have fared worse. India, however, has been impacted more severely than expected,” S&P said.

Conclusion

Overall, S&P expects India’s economy to maintain steady growth in FY26, supported by strong domestic demand and government measures, while monitoring external risks. Lower inflation provides flexibility for the RBI to cut rates, which could further stimulate growth.