S&P ups India's FY26 GDP outlook to 6.5% amid geopolitical instability

S&P raised India's FY26 growth forecast citing strong domestic demand, normal monsoon hopes, lower oil prices, and easing policy - reversing last month's downgrade over global risks

S&P Global Ratings on Tuesday raised India’s GDP growth forecast for the current fiscal year (FY26) to 6.5 per cent, citing expectations of a normal monsoon, lower crude oil prices, and monetary policy easing. This comes as a positive shift after S&P had trimmed its forecast just last month due to global uncertainties.

 

In its latest Asia-Pacific Economic Outlook report, S&P emphasised that domestic demand resilience is playing a key role in supporting India’s economic momentum, especially in an environment where export-driven economies are grappling with global headwinds.

 

“We see India’s GDP growth holding up at 6.5 per cent in fiscal 2026 [year ending March 31, 2026]. That forecast assumes a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing,” S&P said in the report.

 

 

S&P’s revised outlook is in line with the Reserve Bank of India’s projection released earlier this month, which also pegged GDP growth at 6.5 per cent for FY26. 

 

Global risks loom large 

While the outlook for India appears optimistic, S&P warned of rising risks to the global economy, particularly due to escalating tensions in the Middle East. The situation has deteriorated rapidly over the past 12 days, following US military strikes on Iran’s key nuclear facilities. The conflict intensified after Israeli attacks and retaliatory strikes by Iran, drawing the US deeper into the conflict.

 

According to the report, a sustained spike in oil prices triggered by geopolitical instability could have far-reaching effects on the Asia-Pacific region, especially for net energy importers like India.

 

“Long-lasting major increases in oil prices could have significant economic impact in Asia-Pacific, notably via slower global growth and pressure on the current accounts of net energy importers, prices and costs,” S&P warned.

 

India is heavily dependent on energy imports, sourcing 90 per cent of its crude oil and about 50 per cent of its natural gas from foreign markets. This high dependency makes it vulnerable to external price shocks.

 

However, S&P maintained a cautiously optimistic view, noting: “Current conditions on global energy markets—which are well-supplied—make such long-term impact on oil prices unlikely.” 

 

US tariffs and global trade concerns 

The report also highlighted concerns around rising US import tariffs, stating that the uncertainty surrounding them could hurt global trade, investment, and economic growth.

 

Last month, S&P had reduced India’s FY26 growth forecast by 20 basis points to 6.3 per cent, citing these global trade disruptions and tariff shocks. The upward revision now signals improved confidence in India’s internal economic fundamentals, despite the challenging global landscape.

 

(With PTI inputs)