Fitch lifts India FY26 growth forecast to 7.4%
Ratings agency says private consumption will drive expansion, supported by income gains and GST reforms
Fitch Ratings has revised India’s FY26 growth forecast upward to 7.4 percent, from 6.9 percent earlier, citing stronger-than-expected momentum in private consumption.
“Private consumer spending is the main driver of growth this year, supported by strong real income dynamics, increased consumer sentiment, and the impact of recently implemented goods and services tax reforms,” the agency said on December 4.
The upgrade follows India’s 8.2 percent GDP expansion in the second quarter—the fastest pace in six quarters.
For FY27, Fitch expects growth to ease to 6.4 percent, closer to its estimate of potential, with domestic demand—particularly consumer spending—remaining the key driver. Public investment growth is likely to moderate, while private investment should pick up in the second half of FY27 as financial conditions loosen, it said.
Growth is projected to soften further to 6.2 percent in FY28 as higher imports offset slightly stronger domestic demand.
Fitch also highlighted external risks, noting that India faces one of the highest effective tariff rates on its exports to the US of around 35 percent. A trade agreement that lowers this burden would “boost external demand,” the agency said.
On prices, Fitch expects inflation to average 1.5 percent this fiscal year before rising to 4.4 percent in FY27. India’s consumer inflation fell to 0.3 percent in October. “Base effects will drive inflation above target by end-2026; we expect only a slight decline in 2027,” it added.
The agency said falling inflation should allow the Reserve Bank of India room for one more rate cut in December to 5.25 percent, following 100 basis points of cuts in 2025 and a reduction in the cash reserve ratio from 4 percent to 3 percent. With core inflation edging up and growth expected to remain strong, Fitch believes the RBI is at the end of its easing cycle and will keep rates steady over the next two years.
Economists caution that the rupee’s slide toward the 90-per-dollar mark has complicated the case for an immediate rate cut, especially after the strong second-quarter growth print. The RBI’s Monetary Policy Committee will announce its rate decision on December 5.
Fitch expects the rupee to strengthen next year to around 87 per dollar, compared with its earlier projection of 88.5 for 2025.
