S&P Global Ratings has revised India's GDP growth forecast for fiscal year 2026 (FY26) upwards to 6.5%, marking a 20 basis point increase from its previous estimate of 6.3%. This updated projection, released on Tuesday, June 24, 2025, factors in expectations of a normal monsoon season, a moderation in crude oil prices, continued resilience in domestic demand, income-tax concessions and the possibility of monetary easing. The revised forecast aligns with the Reserve Bank of India's (RBI) own projection of 6.5% GDP growth for FY26, which the central bank announced earlier this month.

Several factors underpin S&P's optimistic outlook. The expectation of a normal monsoon is crucial, as it directly impacts agricultural output and rural incomes, both of which are significant drivers of the Indian economy. Lower crude oil prices are also expected to provide relief, as India relies heavily on imports to meet its energy needs. A reduction in oil prices can ease inflationary pressures and improve the country's current account balance. Furthermore, S&P anticipates that income-tax concessions will boost disposable incomes and spur consumption, while potential monetary easing by the RBI could further stimulate economic activity.

In its Asia-Pacific Economic Outlook report, S&P highlighted the resilience of India's domestic demand as a key factor limiting the impact of global headwinds. Unlike economies heavily reliant on goods exports, India's strong internal consumption base provides a buffer against external shocks. However, the agency also acknowledged potential risks to the global economy stemming from ongoing turbulence in the Middle East. It cautioned that a sustained increase in oil prices could significantly impact Asia-Pacific economies, particularly net energy importers like India, by slowing global growth and straining current accounts. Nevertheless, S&P believes that current conditions in global energy markets, characterized by ample supply, make such a long-term surge in oil prices unlikely.

S&P anticipates that the increase in US import tariffs and associated uncertainties will negatively affect global trade, investment, and overall growth. Despite these external challenges, India's economy is projected to remain relatively robust, with domestic demand continuing to drive growth. S&P expects India's economy to grow 6.7% in fiscal year 2027.

While the overall outlook is positive, S&P's report also acknowledges certain risks. Rising core inflation in several Asian economies, including India, Indonesia, and Malaysia, is a concern. Additionally, geopolitical tensions and global trade uncertainties could pose downside risks to growth.

Other organizations have also weighed in on India's growth prospects. The Organisation for Economic Co-operation and Development (OECD) projects India's GDP growth to lead the G20 nations, estimating 6.3% growth in 2025 and 6.4% in 2026.