India’s economic outlook is showing positive momentum, with S&P Global Ratings revising its GDP growth forecast for FY26 to 6.5%. This marks a shift from their previous caution about global uncertainties.
Several domestic factors, including favourable weather conditions and easing monetary policies, are expected to support robust growth for the Indian economy. This update positions India as one of the key players in the region, even as export-driven economies struggle with global headwinds.
S&P Global Ratings adjusted its forecast for India’s GDP growth for FY26, raising it to 6.5%. This change follows the company's earlier revision just a month ago, where they had lowered expectations due to external uncertainties. The global ratings agency now anticipates India’s economy to perform strongly, bolstered by a variety of internal factors.
The new forecast is in line with the strengthening of domestic demand, which has been a critical factor in propelling economic growth. In a world where many export-driven economies are grappling with slowdowns, India’s resilient internal demand is proving to be a stabilising force.
One of the main drivers of S&P’s revised forecast is the expectation of a normal monsoon. India’s economy is significantly influenced by the agricultural sector, and a regular monsoon season is crucial for ensuring a steady supply of food and raw materials. With agricultural output set to increase, rural consumption is likely to see a boost, adding to the overall economic growth.
Crude oil prices have been a persistent concern for the Indian economy, given its reliance on imports for energy needs. However, recent declines in global oil prices are expected to ease inflationary pressures. Lower fuel costs should have a cascading effect on various sectors, reducing the cost of transportation, manufacturing, and household consumption.
The Reserve Bank of India (RBI) has taken steps to ease monetary policy in response to economic conditions. The reduction in interest rates aims to stimulate investment and consumption, both of which are vital for sustaining growth. As borrowing costs decrease, businesses are expected to increase capital expenditure, which in turn will drive job creation and demand for goods and services.
While global markets face uncertainty, India’s economy has shown resilience. Export-driven economies, particularly in the Asia-Pacific region, are struggling with slower growth as global demand weakens. However, India’s strength lies in its domestic consumption-driven model, which has been resilient amid these global challenges.
India’s economic performance is being largely driven by domestic demand, a characteristic that sets it apart from export-dependent nations. Key sectors such as retail, construction, and services continue to show strong growth, indicating that India’s internal consumption is holding up well. The urbanisation trend also continues to support demand for a variety of products and services, making the Indian economy more insulated from external shocks.
The Indian services sector, including IT and business process outsourcing (BPO), continues to thrive globally, providing the country with a competitive edge. India is home to a large, skilled workforce, which positions it as a key player in the global services market. This sector has remained relatively unaffected by the global slowdown, further supporting the economic forecast.
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India’s GDP growth forecast not only has domestic implications but also impacts the broader Asia-Pacific region. As one of the largest economies in the region, India plays a critical role in the economic dynamics of its neighbours. A strong Indian economy contributes to the growth of regional trade and investment, making it an important player in shaping the economic future of Asia.
Countries that depend on trade with India, particularly in sectors like agriculture, technology, and manufacturing, stand to benefit from its growth trajectory. As India’s domestic consumption increases, demand for imports will likely rise, benefiting trading partners in the region.
The upward revision of India’s GDP growth forecast to 6.5% by S&P Global Ratings underscores the optimism surrounding the country’s economic trajectory. While global uncertainties still linger, India’s internal factors, such as a normal monsoon, lower oil prices, and an easing monetary policy, are expected to drive strong economic performance in FY26.
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Published on: Jun 24, 2025, 2:27 PM IST
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