Fitch Ratings raised its forecast for India GDP growth in FY 2026 (ending in March) to 7.4% from 6.9%, citing stronger private consumption on the back of strong real income gains and the impact of recent tax cuts, Moneycontrol reports. The upgrade comes after India’s economy surged 8.2% in 2Q, the fastest in six quarters.

The agency expects growth to ease to 6.4% in FY 2027, driven primarily by domestic consumption, and predicts moderating public investment and a pick up in private investment in 2H.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

US tariffs still a problem: Fitch warned that India faces some of the highest effective US tariff rates and that a trade agreement lowering these duties would help external demand. Inflation is expected to average 1.5% this fiscal year before rising to 4.4% in FY 2027. The agency expects the Reserve Bank of India to deliver one final cut to 5.25% this month (RBI is due to announce its rate decision today), but sees the easing cycle ending soon, with the sliding INR complicating the case for support.

INR outlook: Fitch sees the currency strengthening to 87.00 to the USD next year, firmer than its earlier 88.50 projection.

Finance minister defends GDP calculation-

IMF rating tied to outdated base year, not bad data, minister says: The International Monetary Fund’s ‘C’ rating on India’s national accounts reflects an outdated 2011-12 base year, not deficiencies in the quality of gross domestic product or income statistics, Indian Finance Minister Nirmala Sitharaman told parliament, according to a post on X. The government will shift to a 2022-23 base year from 27 February, addressing methodological gaps flagged by the Fund, the minister said.

IMF upbeat on growth, inflation: The IMF still expects India to grow 6.5% and “appreciated” the country’s inflation management, Sitharaman noted. Beyond national accounts, India earned B ratings on inflation data, government finances, external sector statistics, monetary and financial statistics, and inter-sectoral consistency.

Service sector surged in November

India’s services sector expanded at a faster pace in November as domestic demand strengthened, but export growth slowed sharply, according to the HSBC India Services PMI (pdf), compiled by S&P Global. The index rose to 59.8 from 58.9 in October, remaining above the 50-point expansion threshold for the 52nd straight month and slightly below the preliminary estimate of 59.5.

Weaker sentiment? The survey showed new export orders increased at the slowest pace since March, and 95% of firms reported no change in payrolls. Input cost inflation eased to its lowest level since August 2020, while business confidence fell to its weakest since July 2022, according to the survey. The HSBC India Composite PMI, which combines manufacturing and services output, slipped to 59.7, marking the slowest rate of expansion since May.

Tags: