S&P Projects 6.5% GDP Growth for India in FY26, Citing Tax Cuts and Strong Consumption

S&P Global Ratings has forecast that India’s economic momentum will stay strong over the next two years, largely supported by consumption and policy measures. The agency estimates GDP growth at 6.5% in the current fiscal and 6.7% in the next, attributing the rise to tax reductions and monetary easing.  

India’s real GDP is estimated to have grown 7.8% in the April-June quarter the fastest in five quarters with official Q2 numbers expected on November 28. 

S&P’s Growth Outlook and Key Drivers 

In its Economic Outlook Asia-Pacific report, S&P stated, “We anticipate that India's GDP will grow by 6.5% in fiscal year 2026 (ending March 2026) and 6.7% in fiscal 2027, with risks evenly balanced. Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs.” 

The agency added that a potential trade agreement with the US could boost confidence and support labour-intensive sectors. It highlighted that reduced GST rates, increased income-tax rebates, and lower interest rates are set to lift middle-class consumption more strongly than investment in the near term. 

The FY26 Union Budget raised the income-tax rebate limit from ₹7 lakh to ₹12 lakh, offering relief of around ₹1 lakh crore. The RBI’s 50-basis-point rate cut in June reduced the policy rate to a three-year low of 5.5%, while GST cuts on nearly 375 items from September 22 have made various mass-consumption goods more affordable. 

Policy Landscape and Trade Challenges 

While domestic fundamentals remain strong, S&P noted that higher effective US tariffs are weighing on India’s export-oriented manufacturing sectors. It also indicated that early signs suggest the US may consider easing tariffs on some Indian products. 

S&P cautioned that the US’s shifting trade strategy is pushing governments and companies to focus more on negotiating exemptions rather than improving productivity. Meanwhile, the RBI has projected India’s GDP growth for this fiscal at 6.8%, higher than last year’s 6.5%. 

Read More: India's GDP Growth at 7.0% for 2025 and 6.4% for 2026, Says Moody's! 

Conclusion 

S&P’s projections reinforce the central role of consumption in driving India’s economic growth in the coming years. With tax relief, reduced borrowing costs, and policy support aiding demand, the outlook remains positive. If external trade pressures ease, India’s growth momentum could strengthen even further. 

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