India Ratings Slashed GDP Forecast To 6.3% Driven By Economic Headwinds

India's GDP projections for the fiscal year 2025-26 have been slashed to 6.3%, which is 30 basis points lower as compared to its earlier forecast of 6.6% in December 2024, by India Ratings and research (Ind-Ra).

The Reserve Bank of India (RBI) in its Monetary Policy Committee meeting in June had projected the real GDP growth for the fiscal year 2025-26 at 6.5%.

Why Is The GDP Forecast Slashed?

According to the rating agency, there is an uncertain global scenario from the unilateral tariff hikes by the US for all countries and weaker-than-expected investment climate as major headwinds.

The rating agency said that major tailwinds are factors such as monetary easing, faster-than-expected inflation decline, and likely above-normal rainfall in 2025, said Devendra Kumar Pant, the Chief Economist and Head Public Finance, India Ratings and Research.

Ind-Ra had also assigned a key risk of tariff war and any capital outflow, while forecasting the 2025-26 growth at 6.6% in December 2024.

Factors such as low inflation, monetary easing and favourable monsoons have brightened the scope for a continued economic recovery in 2025-26, and they are likely to minimise the impact of strong headwinds emanating from global uncertainty.

India's Growth Trajectory

As was expected, India's economy grew by 6.5% in real terms in the recently concluded financial year 2024-25, official data showed recently.

In 2023-24, India's GDP increased by an impressive 9.2%, continuing to be the fastest-growing major economy.

Additionally, the economy also grew 8.7% and 7.2% respectively, in 2021-22 and 2022-23.

The report also noted that the pace of monetary easing in 2025 has been faster than its expectations. However, the tariff hikes by the US have increased the global economic uncertainty, leading to slower growth for both global demand as well as trade.

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