India Projected To See GDP Growth Of 6.5% In FY26: S&P Global Ratings

India's annual rate of inflation based on the Wholesale Price Index (WPI) eased further to a 14-month low of 0.39 per cent in May from 0.85 per cent in April and 2.05 per cent in March.

New Delhi: India is likely to see a GDP growth of 6.5 per cent in current fiscal (FY26) due to robust domestic demand, a normal monsoon and monetary easing, a report by S&P Global Ratings said on Tuesday. 

Domestic demand resilience is particularly relevant in limiting the economic slowdown in economies less exposed to goods exports such as India.

“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,” said the report covering Asia-Pacific economies.

In India, falling food inflation also helps contain headline inflation.

The country’s annual rate of inflation based on the Wholesale Price Index (WPI) eased further to a 14-month low of 0.39 per cent in May from 0.85 per cent in April and 2.05 per cent in March.

Meanwhile, the country’s inflation rate based on the Consumer Price Index (CPI) has declined to 2.82 per cent in May this year compared to the same month of the previous year. This is the lowest level of retail inflation since February 2019, figures released last week showed.

Food Inflation declined to 0.99 per cent during May, which is the lowest since October 2021. This is the seventh month in a row that food inflation has registered a decline as the agricultural output has been on the rise.

The RBI has also revised its inflation outlook for 2025-26 downwards from the earlier forecast of 4 per cent to 3.7 per cent, Reserve Bank Governor Sanjay Malhotra said on Friday. The sharp decline in inflation has enabled the RBI to go in for a 50 basis points cut in the repo rate from 6 per cent to 5.5 per cent to spur growth in the economy, in the monetary policy review.

According to S&P Global Ratings, many regional economies had a good start to 2025 on robust domestic demand. Several got a temporary fillip from a front-loading of exports to the U.S. ahead of anticipated tariffs. In India, growth picked up after a soft patch.

The report now expects 4.3 per cent GDP growth in China in 2025 and 4.0 per cent in 2026.

“While this is significantly lower than the government's target for this year, it would be a solid result given the external strains. Chinese imports will be subdued this year and next, but not as weak as exports,” it mentioned.

Asia-Pacific economies face sizable external pressure, notably from uncertain US tariff policy and soft imports in China.

“We expect domestic demand to broadly remain healthy, in part because of policy easing. But what this means for the resilience of regional economies varies sharply, with export-dependent ones less well placed,” the report mentioned.