S&P Maintains India’s FY26 GDP Growth Forecast at 6.5%, Sees Potential for RBI Rate Cuts

Growth and Inflation Outlook

Credit-rating agency S&P Global Ratings has maintained its forecast for India’s real GDP growth at 6.5% for the fiscal year 2025–26, reaffirming confidence in the country’s economic resilience amid global uncertainties.

S&P has also revised downward its inflation projection, reflecting expectations that price pressures will ease in the near term. This improved inflation outlook underpins the agency’s belief that the Reserve Bank of India (RBI) may have room to reduce policy rates by around 25 basis points to further stimulate growth.

Drivers of Stability

Strong domestic consumption remains a key pillar supporting India’s growth forecast. Additionally, a relatively benign monsoon season is expected to bolster agricultural output, supporting rural incomes and consumer spending.

These factors combined have created a stabilizing effect on the economy, cushioning it against some global headwinds.

Policy Implications

The possibility of RBI rate cuts signals that inflation is seen as manageable over the medium term, providing the central bank with flexibility to ease monetary policy if necessary to support economic expansion.

S&P’s view contrasts with the RBI’s current steady rate stance, but it highlights the potential for monetary easing should inflation remain subdued.

Risks and Challenges

Despite firm domestic demand, S&P cautions that external risks could weigh on growth prospects. These include:

• A slowdown in export demand amid weakening global trade.
• Heightened trade tensions and geopolitical uncertainties that could disrupt supply chains and investor confidence.

Such external pressures may limit the RBI’s ability to cut rates aggressively, as policymakers balance growth support with inflation control and financial stability.

Conclusion

S&P’s maintained GDP growth forecast and revised inflation outlook signal optimism about India’s near-term economic trajectory, grounded in strong consumption and favorable agricultural conditions. However, ongoing global uncertainties mean that policymakers must remain vigilant and ready to adjust as conditions evolve.