Fitch Raises India's FY26 GDP Forecast to 6.9% from 6.5%

Global rating agency Fitch has revised India’s economic growth projection for FY26 to 6.9%, up from its previous 6.5% estimate. The upgrade reflects strong domestic demand, with consumer spending supported by favourable real income trends and investment expected to benefit from looser financial conditions. 

However, Fitch also pointed out that India’s growth momentum is likely to taper off in the following years, even as the country continues to perform above its potential.

Domestic Growth Dynamics

Fitch observed that the pace of India’s economic activity has strengthened, with real GDP growth accelerating to 7.8% year-on-year in the second quarter of 2025, compared to 7.4% in the first quarter. This was significantly higher than the earlier projection of 6.7%. 

From the output perspective, stronger service sector expansion at 9.3% year-on-year, up from 6.8%, drove the surge. On the expenditure side, consumption spending, both private and public, was identified as the primary contributor.

As per news reports, it further stated, “We still expect the Reserve Bank of India (RBI) to cut rates by 25 basis points towards the end of the year, as it assesses the impact of the policy loosening already implemented, and that rates will stay there until the end of 2026. We expect the RBI to start raising rates in 2027.”

Global Economic Shifts and Trade Factors

At the global level, Fitch continues to expect a slowdown, with world GDP growth forecast at 2.4% in 2025, a decline from 2.9% in 2024. The agency has slightly raised its global projections since June, with China’s growth revised to 4.7% from 4.2%, the eurozone’s to 1.1% from 0.8%, and the US to 1.6% from 1.5%. For 2026, world growth is expected at 2.3%.

On the trade front, Fitch highlighted that US tariffs on India may eventually be renegotiated to lower levels. Still, the ongoing uncertainty in trade relations is likely to weigh on business confidence and investment. At the domestic policy level, reforms to the Goods and Services Tax (GST), effective from September 22, are expected to provide a modest boost to consumer spending in the near term.

Read More: Corporate India’s Q2 Hiring Slows, Flexibility in Focus!

Conclusion

Fitch’s revised outlook underscores India’s resilience in the face of global economic headwinds. While domestic demand remains the key pillar of growth and inflation pressures are contained, trade uncertainties and a gradual normalisation of growth suggest that momentum will cool beyond FY26..

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