S&P cuts India's GDP growth forecast for FY26, FY27

S&P Global Ratings revises India's economic growth forecast due to high interest rates and lower fiscal impulse.

S&P Global Ratings on Monday (November 25, 2024) revised down its estimate for India's economic growth in the next two financial years as high interest rate and lower fiscal impulse temper urban demand.

In an update to its economic forecast for Asia-Pacific economies after U.S. election results, the rating agency projected a 6.7% GDP growth rate in 2025-26 financial year (April 2025 to March 2026) and 6.8% in the following fiscal year, down from 6.9% and 7%, respectively in previous projections.

For FY25, S&P Global pegged GDP growth rate at 6.8%.

"In India we see GDP growth easing to 6.8% this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter," it said.

The agency expects India's GDP to grow at 7% in FY28.

S&P retained its growth projection for China at 4.8% in 2024 but cut next year's forecast to 4.1% from 4.3% earlier and to 3.8% in 2026 from the previous estimate of 4.5%.

"The impending change in the U.S. administration will be challenging for China and the rest of Asia-Pacific. US tariff increases have become more likely, especially on China, and possible changes in the US macro picture are leading to different interest rate expectations," said the report titled 'Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon'.