India's GDP will maintain its 6.5 per cent GDP growth in the ongoing fiscal year (FY26) due to robust domestic demand, Goods and Services Tax (GST) rate rationalization, and tax reforms in income tax, S&P Global claimed in a report on Tuesday.
The report noted that domestic demand was likely to remain firm as it is sustained by a generally supportive monsoon season, tax reduction, and ramped up government spending.
"GDP growth in the June quarter was better than we expected at 7.8 per cent" said S&P Global in its 'Q4 Asia Pacific Economic Outlook'.
For India, “we have revised our inflation forecast down to 3.2 per cent for this fiscal year after a sharper than expected decrease in food inflation”.
Such moderation in inflation offers room for more monetary policy actions, with S&P Global expecting the Reserve Bank of India (RBI) to deliver a 25 basis points rate cut in the fiscal year.
In the Asia-Pacific region, India has recorded particularly robust investment, led primarily by government expenditure. Domestic demand has continued to be resilient across emerging markets.
Looking to China, total exports remained solid until August after a deep plunge in shipments to the US, which dropped 33 per cent year-on-year in US dollar terms. Shipments to other markets, especially to ASEAN nations, increased strongly.
“We expect exports to slow meaningfully in coming months on higher US tariffs and slowing global growth. While higher-than-expected U.S. tariffs on other economies support China’s relative position in the US, its exporters face much higher US tariffs under the Trump administration,” the report mentioned.
Following a robust beginning of the year, Chinese consumption and investment have decreased, while a sustained decline in housing sales has impacted housing investment, confidence, and consumption.
“We expect China’s economy to slow to about 4 per cent year-on-year in the second half of 2025 and 2026 on weakening exports, tepid organic domestic demand, and contained macro stimulus. Downward pressure on prices will persist,” the report noted.
Region-wide, relatively strong domestic demand will likely act as a buffer against external shocks such as elevated US import tariffs and moderating global growth.
Read also| GST 2.0 Comes Into Effect: Prices Drop for About 370 Items
Read also| JPMorgan Labels India a ‘Bright Spot’ Despite Tariffs and $100,000 H-1B Fee
