Fitch Ratings has upgraded India’s growth outlook for the current financial year (2025-26), citing buoyant consumer spending, improving sentiment and the demand push from recent goods and services tax (GST) reforms.
The agency now expects GDP to expand 7.4 percent in FY26, up from its earlier estimate of 6.9 percent. In its December Global Economic Outlook, Fitch said the Indian economy continued to gain traction in the July–September quarter, clocking 8.2 percent growth compared with 7.8 percent in April–June. While it anticipates some moderation over the remainder of the year to March, the ratings firm said the underlying momentum remains notably stronger than previously assessed.
Fitch identified private consumption as the dominant growth driver this year, supported by rising real incomes, more upbeat household sentiment and the impact of the GST rate reductions implemented in late September. The GST Council cut taxes on roughly 375 items, making over 99 percent of frequently purchased goods cheaper.
Looking ahead, Fitch expects GDP growth to ease to 6.4 percent in FY27, though it sees private investment gaining pace in the second half of that year as financial conditions loosen.
The benign inflation backdrop has also created space for further monetary easing. Consumer price inflation dipped to a record low of 0.3 percent in October, largely due to falling food and beverage prices.
Fitch said this disinflationary trend should allow the Reserve Bank of India to deliver one final 25 bp policy rate cut in December, taking the repo rate to 5.25 percent after 100 bp of reductions earlier in 2025. The projection also factors in multiple cuts to the cash reserve ratio, from 4 percent to 3 percent.
However, with core inflation recovering and economic activity expected to stay robust, the agency believes the RBI is nearing the end of its easing cycle, and that the policy rate is likely to remain at 5.25 percent over the next two years. The RBI’s Monetary Policy Committee will announce its decision on Friday.
