Fitch Revises India's Medium-Term Growth Potential Upward to 6.4%

Fitch Ratings has revised India’s medium-term potential growth rate to 6.4% per year over the next 5 years. This is an increase from the earlier estimate of 6.2% released in November 2023.

Growth Forecasts for 2025–2027

According to Fitch, India’s economy is expected to grow at 6.4% in 2025, 6.3% in 2026, and again 6.4% in 2027. These projections are part of its reassessment of long-term economic trends, not near-term fluctuations.

Labour Force Trends 

The revision reflects changes in labour force participation. The agency noted that India has seen a sharp rise in participation in recent years. Going forward, participation is expected to continue increasing, though at a slower rate. This has led to a higher contribution from labour inputs, specifically total employment, compared to labour productivity.

Capital Adjustments

Fitch also revised down its estimates for capital deepening. Total Factor Productivity (TFP), which measures efficiency in using labour and capital, is projected to grow at 1.5%, consistent with its long-term average. The overall shift in projections is based on updated data on employment and investment patterns.

Emerging Markets Comparison

The report is part of Fitch’s update for 10 major emerging markets. The average potential growth across these economies is now estimated at 3.9%, slightly down from 4% in the previous assessment. China’s potential growth was reduced to 4.3% from 4.6%, largely due to weaker investment and a steeper decline in workforce participation.

The IMF expects India to grow at 6.2% in FY26 and 6.3% in FY27. This is lower than its January 2024 forecast of 6.5% for both years.

Read more: UN Cuts India’s 2025 GDP Forecast to 6.3%, Still One of the Fastest Growing Major Economies

Conclusion

Fitch’s updated figures place India ahead of other emerging markets in terms of potential growth. The revisions are based on recent shifts in labour and capital data, without changing broader structural assumptions.

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