India's GDP Could Decline In FY 2026 - S&P Report

S&P Global Ratings forecasts a possible decline in India’s GDP expansion for the upcoming fiscal year (2026). The rating firm has pegged the growth rate at 6.5 percent, down from its earlier prediction of 6.7 percent for fiscal year 2026.

"India's GDP will grow 6.5 percent in the fiscal year ending March 31, 2026, we expect. Our forecast is the same as the outcome for the previous fiscal year, but less than our earlier forecast of 6.7 percent," S&P said.

Impact of US Tariffs

According to the report, the emerging markets of the Asia-Pacific region will be impacted by the US’ tariff actions and other global factors. However, these economics will witness robust consumer demand in their market. 

As for India, eased inflation, rate cut by RBI MPC and the tax relief given in the recent Budget will boost spending and support borrowings. 

"Cooling food inflation, the tax benefits announced in the country's budget for the fiscal year ending March 2026, and lower borrowing costs will support discretionary consumption in India," S&P said, news agency PTI cited.

The report predicts that the Reserve Bank of India (RBI) will cut the repo rate further in the upcoming fiscal year, following the announcement of a 25-basis-point decline in last month's RBI MPC.

These predictions are based on the assumption of a normal monsoon season in the subcontinent, which will also bring headline inflation closer to the government’s target of 4 percent for FY26.

"Easing food inflation and lower crude prices will move headline inflation closer to the central bank target of 4 percent in the fiscal year ending March 2026, and fiscal policy is contained," S&P said.

More Cuts In US Fed

The firm also underscored its assumption of more cuts in the US Fed rate in the upcoming year.

"We now expect the US Federal Reserve to cut its policy rate by 25 basis points (bp) only one time in 2025, in the end, and make three such cuts in 2026."