Fitch raises India’s FY26 GDP growth forecast to 7.4% on stronger consumer spending

New Delhi: Fitch Ratings has raised India’s GDP growth forecast for the ongoing financial year to 7.4%, revising it upward from 6.9%, citing stronger consumer spending and improved sentiment following recent goods and services tax (GST) reforms.

The firm said that easing inflation provides the Reserve Bank of India (RBI) with scope for an additional cut in the policy rate in December. “We expect falling inflation should give the Reserve Bank of India (RBI) room for one more policy rate cut in December to 5.25%, following 100 bp of cuts in 2025 so far, and a series of reductions in the cash reserve ratio (from 4% to 3%),” Fitch said.

According to the December edition of its Global Economic Outlook, GDP growth accelerated to 8.2% in the July–September quarter, compared with 7.8% in the first quarter of the fiscal year. The firm said it expects growth to moderate over the rest of 2025–26 but has nonetheless revised the full-year projection upward “to 7.4%, from 6.9% in September.”

Private consumption continues to underpin growth, supported by higher real incomes, improved consumer sentiment, and the impact of recently implemented GST changes. Effective 22 September, GST rates on around 375 items were reduced, resulting in over 99% of consumption goods becoming cheaper.

Fitch said it anticipates GDP growth slowing to 6.4% in 2026–27, while private investment is expected to pick up in the latter half of that year as financial conditions ease.

Consumer price inflation fell to a record low of 0.3% in October, aided by declines in food and beverage prices. The agency noted that with core inflation recovering and economic activity projected to remain strong, the RBI is likely at the end of its current cycle of policy easing, with interest rates expected to remain at 5.25% over the next two years.

The RBI’s monetary policy committee will announce its policy review on Friday.