India's GDP Growth Forecast at 6.5%, Inflation Projection Revised Down: S&P Global

S&P Global Ratings has kept India’s gross domestic product (GDP) forecast at 6.5% for FY2025-26. As per the news reports, the agency said growth will be supported by demand, tax reforms, and higher government spending. A normal monsoon is also expected to aid consumption.

Inflation Estimate Cut

The agency lowered its inflation projection to 3.2% for FY26, citing a larger-than-expected drop in food prices. The previous estimate was higher, but the fall in food inflation has brought down the overall outlook.

Monetary Policy Outlook

S&P said lower inflation creates scope for the Reserve Bank of India to adjust rates further. It expects a 25 basis points cut in FY26. The repo rate is currently at 5.5%, after a 50 bps reduction in June when the RBI shifted its stance from accommodative to neutral. The next Monetary Policy Committee meeting is scheduled between September 29 and October 1, 2025.

Recent Economic Data

India’s GDP grew 7.8% in the April-June quarter. Union Minister Ashwini Vaishnaw said the economy now stands at ₹330 trillion, with consumption rising to ₹202 trillion compared with ₹181 trillion last year. Investment stood at ₹98 trillion last year and is expected to rise further in the current fiscal.

Read More: Fitch Raises India's FY26 GDP Forecast to 6.9% from 6.5%!

External Pressures

The S&P report also noted risks from global trade tensions. Higher US tariffs on imports from Asian countries have affected India more than expected. The report said this will impact exports and regional supply chains. China has been less affected compared with India and some Southeast Asian markets.

Conclusion

India’s growth outlook remains at 6.5% for FY26, while inflation has been revised downward to 3.2%. Domestic demand and reforms are driving momentum, though external trade pressures continue to pose challenges.

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