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S&P Global Ratings has revised India’s GDP growth projection for FY26 to 6.5%, down from its earlier estimate of 6.7%, citing global pressures including rising US tariffs and slowing globalisation. Despite external challenges, the agency expects strong domestic demand to continue driving growth in emerging Asian economies.
Forecast Based on Normal Monsoon, Stable Oil Prices
The revised forecast assumes a normal monsoon season and stable global commodity prices, especially crude oil. S&P noted that moderating food inflation, tax benefits from India’s Union Budget for FY26, and lower borrowing costs will support discretionary consumption.
“Our growth outlook for India is in line with last year’s performance but slightly lower than our previous forecast,” S&P said in its Asia-Pacific Economic Outlook, as reported by PTI.
RBI Likely to Cut Rates by 75-100 Basis Points
S&P anticipates that central banks across the Asia-Pacific region will begin easing monetary policy through rate cuts. For India, S&P expects the Reserve Bank of India (RBI) to reduce interest rates by 75 to 100 basis points in the current cycle.
Last month, the RBI began this process by cutting the repo rate by 25 bps, from 6.50% to 6.25%. With headline inflation expected to approach the 4% target, S&P sees space for further easing, especially with fiscal policy under control.
Global Trade Tensions Weigh on Regional Outlook
S&P also highlighted rising U.S. protectionism as a key risk to Asia-Pacific economies. The new U.S. administration has imposed:
An additional 20% duty on Chinese imports
A 25% tariff on select imports from Canada and Mexico
A 25% global tariff on steel and aluminium
Deferred tariffs on several other products
The agency warned that such trade actions and policy shifts could strain global supply chains and trade momentum, particularly in export-reliant economies.
