Fitch Raises India’s FY26 Growth to 6.9% Driven by Strong Demand and Investment

India continues to show economic buoyancy in the face of international geopolitical risks, with growth expected to stay over 6 per cent for the next three years. Fitch Ratings' latest 'Global Economic Outlook,' published on Wednesday, has upgraded India's growth forecast for the current financial year to 6.9 per cent.

In the wake of a robust Q2 2025 growth of 7.8 per cent, Fitch has revised its forecast for the fiscal year to March 2026 (FY26) upward from 6.5 per cent in June to 6.9 per cent.

The report also pointed out that domestic demand would be the key driver of growth, aided by strong real income trends that stimulate consumer spending, and tighter financial conditions that are likely to trigger investment.

Fitch's note also forecasts India's year-on-year growth to hit 6.3 per cent in FY27. With the economy running marginally above potential, "we expect growth to eke down to 6.2 per cent in FY28."

“We still expect the Reserve Bank of India (RBI) to cut rates by 25bp towards the end of the year, as it assesses the impact of the policy loosening already implemented, and that rates will stay there until end-2026. We expect the RBI to start raising rates in 2027,” said the report.

On the international side, Fitch has slightly raised its 2025 world growth projection to 2.4 per cent based on better-than-expected data from China and the eurozone, while warning that the US economy is exhibiting more noticeable signs of deceleration.

China's growth projection has been upgraded to 4.7 per cent from 4.2 per cent, the eurozone's to 1.1 per cent from 0.8 per cent, and the US to 1.6 per cent from 1.5 per cent. World growth for 2026 stands at 2.3 per cent.

“Greater clarity about US tariff hikes does not alter the fact that they are huge and will reduce global growth. And evidence of a slowdown in the US is now appearing in the hard data; it’s no longer just in the sentiment surveys,” according to Brian Coulton, Chief Economist at Fitch.

The agency sees the Federal Reserve cutting two 25-basis point rates in September and December, followed by three more in 2026.

Fitch also believes that US price pressures will intensify later in 2025 to restrict real pay growth and soften consumer demand, given that job growth is already weakening.