S&P Global retains India's GDP forecast at 6.5%, revises inflation downward

The report added that low inflation provides room for further monetary policy adjustments, with S&P expecting a 25-basis-point (bps) rate cut by the Reserve Bank of India in FY26

S&P Global Ratings on Tuesday retained India's gross domestic product (GDP) forecast at 6.5 per cent for 2025-26 (FY26) on the back of strong demand, increasing investment, and tax reforms.

 

In its report titled 'Economic Outlook Asia-Pacific Q4 2025: Growth To Ease On External Strain', S&P Global said: "We forecast India's GDP growth to hold steady at 6.5 per cent this financial year. We expect domestic demand to remain strong, supported by a largely benign monsoon season, cuts in the income and the goods and services tax (GST), and accelerating government investment."

 

S&P revised India’s inflation outlook downward. "We have revised our inflation forecast down to 3.2 per cent for FY26 after a sharper-than-expected decrease in food inflation," it said.

S&P Global expects 25 bps rate cut

It added that low inflation provides room for further monetary policy adjustments, with S&P expecting a 25-basis-point (bps) rate cut by the Reserve Bank of India (RBI) in FY26. 

 

The next Monetary Policy Committee (MPC) meeting is scheduled from September 29 to October 1. In June, the MPC had cut the repo rate by 50 bps to 5.5 per cent and shifted its stance from accommodative to neutral. Since then, the RBI has maintained the repo rate at 5.5 per cent.

India hit hard by Trump tariffs

According to the report, US tariffs on imports from different Asian economies will shape both their export outlook and their role in regional supply chains. "Relative to our June assumptions on US tariffs, India has been hit much harder than expected, and the region's developed economies broadly as expected," it said, adding that China has fared better than other Asian economies.

 

Higher US tariffs and the associated uncertainty will weigh on exports and growth, S&P said. The uncertainty, lack of detail, and exceptions cloud any estimate of new effective US tariffs, it added.

India’s GDP growth at 7.8%

India’s GDP grew by 7.8 per cent in the June quarter, and this momentum is expected to strengthen further due to income tax cuts and GST reforms.

 

Speaking to reporters on Monday, Union Minister Ashwini Vaishnaw emphasised that these reforms are driving both consumption and investment. He noted that India’s GDP stands at ₹330 trillion, with consumption accounting for ₹202 trillion, up 12 per cent from ₹181 trillion last year.

 

“With rising consumption, investment is set to increase significantly. Last year, investment was ₹98 trillion; this year, demand-driven growth will push it much higher,” Vaishnaw said.