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Fitch Ratings has raised India's GDP forecast for the current financial year to 7.4%, up from 6.9%, citing stronger household spending and improved consumer sentiment supported by recent GST reductions. GDP grew 8.2% in the latest quarter, though Fitch expects growth to ease slightly in the coming months. The agency attributes much of this year's momentum to higher real incomes and lower prices on most everyday goods. Looking ahead, GDP is projected to moderate to 6.4% in FY 2027, with private investment expected to pick up as borrowing conditions improve. Falling inflation has created room for one more RBI rate cut, likely bringing the repo rate to 5.25%.
Fitch Ratings has revised India's GDP outlook for the current financial year, raising its growth estimate to 7.4% from 6.9%. The agency attributes this improvement to stronger household spending and better consumer sentiment, helped in part by recent changes in the Goods and Services Tax (GST) structure. Advertisement
India's economic momentum picked up in the last reported quarter, with GDP rising 8.2%, up from 7.8% in the April-June period. Despite this acceleration, Fitch expects growth to soften slightly over the next two quarters. Its Global Economic Outlook released in December maintains a full-year growth projection of 7.4%.
A key factor supporting this year's economic activity is private consumption. The report notes that families are spending more due to higher real incomes, improved confidence, and the effect of GST reductions. Since September 22, GST rates have been cut on around 375 items, making over 99% of commonly purchased products more affordable.
Looking ahead, Fitch expects India's GDP growth to moderate to 6.4% in FY 2027. It also anticipates that private investment will begin to pick up in the second half of FY 2026-27 as borrowing conditions become more favourable. Inflation remains a bright spot, falling to just 0.3% in October, mainly because of lower prices for food and beverages.
The agency believes the easing inflation trend provides room for the Reserve Bank of India (RBI) to implement one more policy rate cut in December, reducing the repo rate to 5.25%. This follows a total of 100 basis points of rate cuts already delivered in 2025, along with a reduction in the cash reserve ratio from 4% to 3%.
The RBI's Monetary Policy Committee will announce its latest policy decision on Friday. Fitch expects this upcoming cut to be the final one in the current cycle. With economic activity still strong and core inflation gradually stabilising, the agency forecasts the repo rate will remain at 5.25% for the next two years.
Source: PTI
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