Fitch lifts India’s FY26 GDP forecast from 6.5% to 6.9%

Fitch Ratings on Wednesday raised India’s GDP growth forecast to 6.9 per cent for current fiscal year, from 6.5 per cent earlier, citing strong June quarter growth and domestic consumption-led demand.

Fitch is the first global rating agency to have upped India’s GDP growth estimates for current fiscal year after the string of downward revisions by various agencies earlier this year due to trade and tariff uncertainties. In its Global Economic Outlook (GEO)-September, Fitch said the pace of economic activity accelerated sharply between the March and June quarters of current fiscal year. The real GDP growth in April-June rose to 7.8 per cent year-on-year, from 7.4 per cent in January-March.

In its June GEO report, Fitch had forecast a 6.7 per cent growth for the April-June quarter. “On the back of the 2Q25 (April-June) outturn, Fitch has revised up its forecast for the fiscal year ending March 2026 (FY26) to 6.9 per cent from 6.5 per cent in the June GEO,” it said.

Fitch said the trade tensions with the US had increased in recent months, with the US imposing an additional 25 per cent tariff on imports from India. Effective August 27, Indian goods in US attract a 50 per cent duty.

“We expect this will eventually be negotiated lower, but the uncertainty around trade relations will dampen business sentiment and potentially investment. The government has adopted reforms to the Goods and Services Tax to be effective from September 22, which should modestly boost consumer spending over the remainder of this and the next fiscal years,” Fitch said.

Domestic demand would be the key driver of growth as strong real income dynamics supported consumer spending and looser financial conditions should feed through to investment, Fitch added. However, Fitch expects growth to slow in the second half (October-March) of the financial year.