New Delhi : Global ratings agency Fitch Ratings has revised India’s FY26 GDP growth projection upward to 7.4%, from its earlier estimate of 6.9%, marking its third upgrade in 2025. The agency cited robust domestic consumption, resilient services exports, and moderating inflation as the primary engines propelling Asia’s third-largest economy.
The revised forecast reinforces India’s position as the fastest-growing major economy, surpassing China’s projected 4.8% expansion for the fiscal year.
India’s Growth Outperforms Global Outlook
While India’s domestic momentum remains strong, Fitch noted that global GDP growth for calendar year 2025 is expected at 2.5%, only slightly higher than its September outlook. The agency warned that worldwide expansion remains constrained by:
Rising U.S. tariffs
Escalating geopolitical tensions
Persistent energy price volatility
Consumption, Manufacturing, and Rural Demand Lead the Upswing
India’s economic activity has been buoyed by a 6.5% jump in private consumption in Q3 FY26, powered by rural market revival, festive spending, and an uptick in discretionary purchases.
Other indicators show continued strength:
Manufacturing PMI reached a 12-month high of 58.5
Services exports continued to outperform global peers
Inflation remained within the RBI’s tolerance band
Rupee Weakness and Oil Prices Pose Challenges
Despite the strong macro outlook, the Indian rupee dipped 16 paise to 90.11 per USD, driven by foreign portfolio outflows and rising crude oil prices.
Forex reserves fell by $2.5 billion in November to $650 billion, though they remain $48 billion higher year-to-date.
RBI Rate Cut Spurs Investment, FDI Inflows Jump
The Reserve Bank of India’s 25 bps rate cut in December has helped stimulate credit growth and private investment. RBI Governor Shaktikanta Das attributed India’s resilience to “fiscal prudence and calibrated monetary action.”
Meanwhile, India attracted $15 billion in FDI inflows, strengthening its sovereign rating outlook at BBB- (stable).
Markets Optimistic Despite State-Level Fiscal Stress
Equity analysts remain upbeat. Abhishek Mishra of SKG Investment forecasts the Nifty 50 stabilizing at 26,500–27,000 by the end of December, driven by foreign inflows and domestic liquidity.
However, concerns persist at the state level. Maharashtra’s ₹2 lakh crore revenue deficit from supplementary demands reflects uneven fiscal health across sub-national governments.
Fitch: India Must Diversify Export Markets
Fitch Director Ian Linnell cautioned that India must diversify trade relationships as Trump-era U.S. tariff policies could disrupt global supply chains. Fitch emphasized the need to reduce dependence on the U.S. and China, urging accelerated efforts in markets across Southeast Asia and Africa.
