Synopsis: India’s GDP is projected to remain steady at 6.5% in FY26, supported by robust domestic demand, tax reforms, and rising government investment. S&P Global also expects lower inflation at 3.2% and a possible RBI rate cut this fiscal.
India’s Growth Outlook
According to the S&P Global Q4 Asia Pacific Economic Outlook, India’s economy is expected to sustain 6.5% growth in FY26, driven by strong domestic demand, income tax reforms, and GST rate rationalisation.
The report highlighted that the June quarter GDP growth of 7.8% exceeded expectations, showcasing the resilience of the Indian economy despite global challenges.
Drivers of Growth
- Strong domestic demand: Consumption remains resilient, supported by a benign monsoon.
- Tax reforms: Income tax cuts and GST rate adjustments are expected to boost spending.
- Government investment: Accelerating public sector spending continues to be a key growth engine.
Inflation and Monetary Policy
S&P revised India’s inflation forecast down to 3.2% for FY26, mainly due to a sharper-than-expected fall in food prices.
This opens space for further monetary easing, with the report anticipating a 25 basis point rate cut by the Reserve Bank of India (RBI) this fiscal.
India vs China: Diverging Paths
While India’s growth outlook remains strong, China faces slowing exports, weak domestic demand, and falling housing sales. S&P projects China’s growth to slow to around 4% in H2 2025 and 2026, as higher US tariffs and declining confidence weigh heavily on its economy.
In contrast, India’s resilience in domestic demand and government-led investments positions it as a bright spot in the Asia-Pacific region.
Asia-Pacific Context
Across Asia, domestic demand has helped cushion the impact of slowing global growth and higher US tariffs. Emerging economies like India remain better positioned compared to export-reliant peers.
Disclaimer: This article is based on insights from the S&P Global Q4 Asia Pacific Economic Outlook. It is for informational purposes only and should not be considered financial advice.
