Fitch raises India's FY26 GDP forecast to 7.4% from 6.9%, on high consumer spending, GST reforms
Fitch Ratings has raised Indias FY26 GDP growth forecast to 7.4% from 6.9%, driven by strong private consumer spending, higher real incomes, and positive effects of GST reforms. This follows government data showing GDP growth hit a six-quarter high of 8.2% in Q2 FY26.
Synopsis
Fitch Ratings has raised India’s FY26 GDP growth forecast to 7.4% from 6.9%, driven by strong private consumer spending, higher real incomes, and positive effects of GST reforms. This follows government data showing GDP growth hit a six-quarter high of 8.2% in Q2 FY26.
Fitch Ratings has raised India’s GDP growth forecast for FY26 to 7.4% from 6.9%, citing stronger consumer spending and the positive impact of recent GST reforms.
As per the global rating agency, private consumer spending is the main driver of growth this year, supported by strong real income dynamics, increased consumer sentiment, and the the ETR would boost external demand.
The estimates come nearly a week after governemnt data showed that India's GDP quickened a six-qurter high of 8.2% in the second quarter of FY26, up from 5.6% in the same quarter last year.
Consumer price inflation fell to an all-time low in October of 0.3%, driven by lower food and drink prices (-3.7% in the year to October); food prices have been falling on an annual basis since June because of the combination of above-average monsoon rains and adequate food stocks.
Core inflation has remained above 4% since February, although much of its recent resilience is linked to high gold and silver prices. "Base effects will drive inflation above target by end 2026; we expect only a slight decline in 2027."
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'Room for rate cut'
Fitch expects falling inflation should give the Reserve Bank of India(RBI) room for one more policy rate cut in December to 5.25%,following 100bp of cuts in 2025 so far, and a series of reductions inthe cash reserve ratio (from 4% to 3%). With core inflationrecovering and activity projected to remain strong, it expects thecentral bank has reached the end of its easing cycle, and that rates willremain at 5.25% over the next two years.
FY27 Growth projection lowered
Fitch has has said the growth will slow in FY27 to 6.4% as per its trend assesment, with domestic demand and in particular consumer spending remaining the main driver. "Public investment growth willease in the context of relatively tight fiscal policy, but privateinvestment should pick up in 2HFY27 as financial conditions loosen;private consumer spending growth will also ease as rising inflationconstrains incomes."
Net trade will contribute to growth as importgrowth normalises after a strong FY26, Fitch said.
Projections for FY28
For FY28, the agency expects growthto ease to 6.2%, as higher imports offset slightly stronger domesticdemand growth. India faces one of the highest ETRs on its exportsto the US (about 35%); a trade agreement with the US that lowersthe ETR would boost external demand.
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