S&P Global Cuts India’s GDP Growth Forecasts to 6.7% for FY26

Global ratings agency S&P Global has revised its economic outlook for India, reflecting global economic conditions and domestic challenges. While India’s GDP growth remains robust compared to other major economies, concerns like persistent food inflation, high interest rates, and transitory sectoral slowdowns weigh on the projections.

Revised GDP Projections: Insights and Implications

S&P Global is now projecting India’s GDP growth to be 6.8% for FY25, unchanged from its previous outlook, but it has lowered expectations for FY26 to 6.7% and FY27 to 6.8%. For FY28, the agency expects a modest recovery, with GDP growth pegged at 7%. The slowdown is attributed to high interest rates curbing urban demand and a limited fiscal impulse affecting economic activity. While India’s purchasing manager indices (PMIs) remain in the expansion zone, other high-frequency indicators reveal a temporary softening, especially in the construction sector, as seen in the September quarter.

Persistent food inflation is a significant concern, delaying monetary policy easing by the Reserve Bank of India (RBI). S&P anticipates only one rate cut in the current fiscal year, ending March 31, 2024.

Comparative Growth Outlook and Economic Resilience

India’s GDP grew by an impressive 8.2% in FY24, maintaining its status as the fastest-growing major economy. Historical growth rates include 7.2% in FY23 and 8.7% in FY22, highlighting sustained economic momentum. For FY25, the RBI has forecast GDP growth at 7.2%, aligning with the International Monetary Fund (IMF) and World Bank’s projections of 7%.

Despite the current challenges, the Indian economy continues to exhibit resilience, driven by structural reforms.

Conclusion: While India’s growth trajectory faces short-term headwinds, including inflation and sectoral fluctuations, its medium-term prospects still remain strong. With effective policy interventions and sustained momentum, India is well-positioned to maintain its economic growth ahead.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions