S&P Global has revised its GDP growth projection for India in the current fiscal year to 7 per cent from the previous estimate of 6.6 per cent. This adjustment is attributed to strong consumption patterns and robust industrial activity observed recently. The report highlights that India’s growth during the June quarter surpassed expectations, fuelled by vigorous industrial performance, healthy consumer spending, solid goods exports, and increasing government investment.

The increased GDP forecast reflects an optimistic outlook for the Indian economy due to these positive indicators. The emphasis on strong industrial activity and consumption suggests a resilient economic environment. However, S&P Global has pointed out that the growth rate may moderate in the latter half of the fiscal year.

Moderation Expected in Second Half of Fiscal Year

According to S&P Global, while the outlook for the first half of the fiscal year remains strong, growth is expected to ease in the second half. The anticipated moderation is attributed to the diminishing impacts of Goods and Services Tax (GST) rationalisation and income tax cuts that have driven consumption and investment. These factors, which have provided a temporary boost, are expected to stabilise as the year progresses.

The report underscores the importance of agricultural output and food inflation as critical aspects that will influence growth. Weather conditions are also noted as a potential risk, specifically citing that cumulative rainfall was 15 per cent below normal as of September 9, 2026. This shortfall could impact agricultural production and, in turn, food prices, which remain variables needing close monitoring.

In summary, while the current economic indicators showcase a robust growth trajectory, the projected moderation signals that careful attention is necessary as the fiscal year advances, particularly concerning GST and tax policy impacts.

Inflation and Monetary Policy Outlook

S&P Global has also addressed inflation as a significant concern for India, linking it to rising energy prices. The report indicates that inflation remains within the target range set by policymakers but is trending upwards due to pressures from energy and food prices. The expectation is that higher oil prices will contribute to a modest increase in inflation rates.

Food prices may also escalate due to the effects of El Niño, potentially leading to supply chain disruptions. However, S&P Global suggests that preparedness measures are in place to mitigate severe supply issues that could adversely affect the economy at a macro level. As such, while inflationary pressures are acknowledged, the impacts may be managed effectively to avoid crisis situations.

In response to inflation trends, some monetary policy tightening may be necessary. S&P Global notes that several central banks across the Asia-Pacific region, including India’s, have already raised policy rates in 2026. Additionally, it anticipates further rate hikes in the remaining months of the year to control inflation and support exchange rate stability as global interest rates rise.

The report indicates that while currency depreciation pressures have eased in the third quarter after a volatile first half, the currencies of India and several other regional economies had still seen declines exceeding 5 per cent by mid-September 2026. This persistent currency weakness poses risks of capital outflows, especially with rising US interest rates, highlighting the need for vigilance from central banks in the region.

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