Fitch Raises India's FY26 Growth Forecast to 6.9%
Global ratings agency Fitch has upgraded India's economic growth forecast for the 2025-26 fiscal year to 6.9%, up from its previous estimate of 6.5%. The revision follows a stronger-than-expected GDP expansion of 7.8% in the second quarter of 2025. Fitch cited strong domestic demand as the primary driver of growth but warned that trade frictions with the US could dampen business sentiment. This optimistic forecast positions India's projected growth as the highest among its peers.
Unpacked:
Fitch cited strong domestic demand, notably robust private spending and investment, as the main reason for the upgrade. The unexpectedly high GDP growth in Q2 2025 and increased capital expenditure by the government also contributed to the positive outlook.
India's projected growth rate of around 6.9% is the highest among major economies. By contrast, global growth is expected to slow to about 2.5% in 2025, with other large economies like the US and China growing more slowly.
Key risks include trade frictions with the US, global geopolitical uncertainties, supply chain disruptions, and potential export demand declines. Domestic challenges involve raising per capita income and ensuring broad-based employment growth.
The government has focused on infrastructure-led development, increased capital expenditure, production-linked incentives (PLI), support for small businesses, and digital infrastructure expansion. These policies aim to boost investment, innovation, and job creation.