Fitch raises India FY26 GDP growth forecast to 7.5% on strong domestic demand

New Delhi: Fitch Ratings on Friday raised India's economic growth forecast for FY26 to 7.5% year-on-year from 7.4% projected in December, citing strong domestic demand as the key driver of expansion.

The ratings agency also revised its FY27 growth estimate upward to 6.7% from 6.4% earlier.


Fitch said there are signs of a slowdown in real economic activity during January and February, but overall momentum remains resilient and credit growth continues in double digits. It expects growth to moderate in the first half of FY27 as rising inflation pressures real incomes and could curb the pace of consumer spending. "Investment growth will ease in the short term but should recover in sequential terms from 2HFY26/27 with looser financial conditions and lower real interest rates," it said in a report.

Also Read: India's Q3 FY26 GDP growth slows sequentially to 7.8% under new series; FY26 estimate rises to 7.6%

Further, softer domestic demand may dampen imports, resulting in a positive contribution from net trade to growth. At the same time, external demand could see marginal support from a lower US effective tariff rate following a US Supreme Court decision and Section 122 blanket tariffs, according to the Global Economic Outlook-March 2026.

India's gross domestic product grew 7.8% in the third quarter of FY26 compared with 8.4% in the second quarter. In FY25, it grew 7.1%, according to official data.

Globally, GDP growth is projected at 2.6% in 2026, assuming the ongoing conflict in West Asia does not trigger a large spike in energy prices that pushes oil above $70 per barrel.

"On the basis of an assumption that the spike in oil prices is relatively short-lived, global growth should continue at a steady pace this year," said Brian Coulton, chief economist, Fitch Ratings.

Also Read: Every 10% rise in oil prices could shave 20–25 bps off India’s GDP growth, says HDFC Bank

"But a scenario where oil prices rise to $100 and stay there would be a significant adverse global supply shock," he added.

Inflation in India is expected to rise to 4.5% by December 2026, Fitch Ratings said, adding that persistently high oil prices could accelerate inflation beyond the currently projected gradual increase.

On monetary policy, the agency expects the policy rate to remain at 5.25% through this year and next. The Reserve Bank of India's monetary policy committee kept the policy rate unchanged at 5.25% in February.