S&P raises India's FY26 GDP forecast to 6.5% on monsoon, policy easing hopes

Global ratings agency S&P Global Ratings has raised India's GDP forecast to 6.5% for the financial year 2025-26, assuming the country receives a "normal" monsoon, the RBI continues to push for easing of monetary policy, and crude oil prices remain stable. The current forecast is higher than the 6.3% estimated by S&P in May. The global ratings agency earlier slashed India's forecast by 20 basis points, citing the potential impact of US tariffs and the consequent uncertainties.

S&P, in its Asia Pacific Economic Outlook released on Tuesday, stated that domestic demand will play a key role in easing the global impact in countries less exposed to exports. "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, as reported by PTI.

S&P also stated that the turbulence in the Middle East, especially due to tensions between Iran and Israel, could lead to an increase in oil prices, thus impacting Asia-Pacific. However, it sees such an impact as unlikely. "However, current conditions on global energy markets—which are well-supplied—make such a long-term impact on oil prices unlikely," S&P said.

The GDP projections by S&P are in line with the RBI, which earlier this month said in its monetary policy announcement that it expected the real GDP growth for 2025-26 at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%.

As per the latest GDP data released by the government, India’s economy grew by 7.4% in Q4 FY25 against 8.4% growth in the same quarter last fiscal, and recorded real GDP growth at 6.5% in FY25. The Q4 estimate was a clear surprise as it was 40 bps higher than the RBI's 93rd professional forecasters survey median estimate of 7%. The GVA grew by 6.8% in Q4 and 6.4% in FY25.