Fitch Ratings has revised India’s economic growth outlook for FY26 upward to 7.4%, from its earlier projection of 6.9%, citing stronger-than-expected consumer demand and improved sentiment. The revision was published in the latest Global Economic Outlook report.
Key Growth Drivers
Fitch notes that private consumption will be the primary catalyst for growth in the coming fiscal year. The momentum is supported by:
- Rising real household incomes
- Strengthened consumer confidence
- The ongoing benefits of GST-led structural reforms
Improved purchasing power and resilient domestic spending are expected to continue sustaining economic momentum.
Recent Economic Performance
- India’s GDP grew 8.2% year-on-year in Q2 (July–September) — the fastest pace in six quarters.
- The performance surpassed both market expectations and government projections.
- A narrowing gap between nominal and real GDP was observed, with the GDP deflator increasing just 0.5% year-on-year, indicating muted inflationary pressure.
Inflation, Interest Rates, and Monetary Outlook
With inflation easing, Fitch expects the Reserve Bank of India (RBI) to begin monetary policy easing:
| Indicator | Outlook |
| Expected policy rate by December 2025 | 5.25% |
| Total projected rate cuts in 2025 | 100 basis points |
Lower borrowing costs are anticipated to further support domestic demand and investment activity.
Currency Outlook
Despite recent fluctuations, the Indian rupee is expected to stabilise and gradually strengthen:
| Timeframe | Expected Level |
| By end-2026 | ₹87 per US Dollar |
| Remainder of FY27 | Stable trend expected |
The stabilisation is attributed to improving macroeconomic fundamentals and stronger capital flows.
Outlook Summary
Fitch’s upgraded forecast reflects confidence in India’s continued economic resilience, with household spending, structural reforms, and favourable monetary conditions expected to support robust expansion over the next fiscal cycle.
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