Fitch Ratings has upgraded India’s growth forecast for FY26 to 7.4 percent, up from its earlier estimate of 6.9 percent, attributing the revision to stronger-than-anticipated private consumption. The agency noted on December 4 that household spending has been the primary driver of growth this year, supported by rising real incomes, improved consumer sentiment, and the effects of recent goods and services tax reforms.
The revision follows India’s impressive 8.2 percent GDP growth in Q2, marking the fastest expansion in six quarters. Looking ahead, Fitch projects growth to moderate to 6.4 percent in FY27, with domestic demand, especially consumer spending, continuing to lead. While public investment is expected to slow, private investment may accelerate in the latter half of FY27 as financial conditions ease. Growth could soften further to 6.2 percent in FY28, as higher imports offset slightly stronger domestic demand. Fitch also highlighted external risks, including India’s high effective tariff rates on exports to the US, suggesting that a trade deal could lift external demand.
On inflation, Fitch forecasts an average of 1.5 percent this fiscal year, rising to 4.4 percent in FY27. The agency expects the RBI to have scope for one final rate cut in December to 5.25 percent but sees the easing cycle ending due to firm growth and core inflation pressures. The rupee, which has approached 90 per dollar, is expected to strengthen to around 87 next year.
