S&P lowers India’s FY26 GDP growth to 6.5%

India’s gross domestic product (GDP) will grow 6.5% in fiscal 2026, ratings firm S&P Global said, while lowering its projections for the country in its latest quarterly economic update for Asia-Pacific economies.

Asia-Pacific economies will feel the strain of rising US tariffs specifically and a pushback on globalization more generally, the rating firm said, while adding that domestic demand momentum will broadly hold up, especially in the region’s emerging-market economies.

On India, the ratings firm said: “Our forecast is the same as the outcome for the previous fiscal year, but less than our earlier forecast of 6.7%,” assuming the upcoming monsoon season to be normal “and that commodity–especially crude–prices will be soft.”

Cooling food inflation, the tax benefits announced in the budget for the fiscal ending March 2026, and lower borrowing costs will support discretionary consumption, it said.

The ratings firm cautioned that all of Asia-Pacific will feel the indirect impact of the global tariff turmoil.

“Slower growth internationally as a result of trade friction and the associated uncertainty will weigh on exports. Also, Asian manufacturers will feel pressure from Chinese manufacturers, as Chinese producers seek alternatives to the US market,” it said.

“Several Asia-Pacific economies are likely to face direct US tariffs. One reason is the US plan to raise tariffs on cars, pharmaceuticals and semiconductors. We assume the US will impose a 10% levy on these imports,” it added.

On monetary policy, the ratings firm expects the Reserve Bank of India (RBI) to cut interest rates by another 75-100 basis points in the current cycle. One basis point is one-hundredth of a percentage point.

Easing food inflation and lower crude prices will move headline inflation closer to the central bank target of 4% in the fiscal year ending March 2026 and fiscal policy is contained, it added.

As of February, food inflation in India was at 3.75%, marking the lowest level since May 2023. This decline is significant compared to the 6.02% rise seen in January 2025.

The moderation in food prices was largely attributed to reduced costs in various categories such as vegetables and pulses, which have seen price contractions.