Fitch Raises India’s FY26 GDP Growth Forecast to 7.4% Amid Strong Consumption & GST Boost
FITCH Ratings on Thursday raised India’s GDP growth forecast for the current fiscal to 7.4 per cent, up from its previous estimate of 6.9 per cent, citing increased consumer spending and improved sentiment driven by GST reforms. Falling inflation, it noted, provides the Reserve Bank of India (RBI) with room for one more policy rate cut in December to 5.25 per cent, after 100 bps of cuts so far in 2025.
The agency highlighted that GDP growth accelerated sharply in the July–September quarter to 8.2 per cent, compared to 7.8 per cent in April–June.
“Growth will ease over the remainder of the financial year 2025-26 (to end-March), but we have raised our full-year growth forecast to 7.4 per cent, from 6.9 per cent in September,” Fitch said in its December Global Economic Outlook.
Consumption-led growth driving the economy
Fitch emphasized that private consumer spending remains the main engine of growth, supported by:
Strong real income momentum
Improved consumer sentiment
Impact of recently implemented GST reforms
Effective September 22, GST rates on about 375 items were reduced, leaving over 99% of consumption goods cheaper.
The agency expects GDP growth to moderate to 6.4 per cent in FY27.
Inflation easing & RBI policy outlook
Consumer price inflation touched an all-time low of 0.3 per cent in October, primarily due to lower prices of food and beverages.
Fitch noted:
“Falling inflation should give RBI room for one more rate cut in December to 5.25 per cent, following 100bp of cuts in 2025 so far, along with CRR reductions from 4 per cent to 3 per cent.”
RBI’s monetary policy announcement is scheduled for Friday.
However, with core inflation ticking up and economic activity holding strong, Fitch believes:
RBI has reached the end of its easing cycle
Rates are likely to remain at 5.25 per cent for the next two years
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