Fitch Ratings has revised its economic outlook for India, lifting the FY26 growth forecast to 7.4% from its earlier estimate of 6.9%. The improved projection reflects stronger-than-expected domestic consumption, rising household spending capacity, and the positive impact of recent GST reforms on economic activity.
Growth Drivers and Economic Indicators
According to the updated forecast, private consumption remains the biggest contributor to India’s economic momentum. Rising real incomes, improved consumer confidence, and expectations of reduced tariff pressures supporting external trade have further strengthened the outlook.
The upgrade follows fresh government data showing India’s GDP expanded 8.2% in the second quarter of FY26 — the fastest pace in six quarters and significantly higher than the 5.6% recorded during the same period last year.
Inflation trends have also provided support. Consumer inflation eased to a historic low of 0.3% in October, largely driven by a 3.7% decline in food and beverage prices. Food inflation has remained negative since June, aided by favourable monsoon patterns and sufficient supply buffers.
Policy Trajectory and Long-Term Outlook
Looking ahead, Fitch forecasts India’s growth to normalize to 6.4% in FY27, aligning with long-term structural trends, while domestic demand — especially household consumption — is expected to continue driving expansion.
For FY28, the agency estimates GDP growth of 6.2%, noting that rising imports may counterbalance marginally stronger domestic demand. Fitch also highlighted that India continues to face high effective tariff rates on exports to the United States, currently around 35%, posing a challenge for trade competitiveness.
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