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India to be fastest-growing major economy with 6.5% GDP in FY26: S&P
Crisil highlighted that favourable monsoons, easing crude oil prices averaging $65–$70 per barrel, and reduced interest rates will support growth. Inflation is expected to ease towards the Reserve Bank of India’s (RBI) 4 per cent target, enabling monetary policy flexibility. Income tax cuts and potential goods and services tax rationalisation are expected to bolster consumption, particularly in rural areas, Dharmakirti Joshi said in an article on S&P Global.
India is expected to remain the world’s fastest-growing major economy, with GDP projected to rise 6.5 per cent in FY26, matching FY25, according to S&P.
Growth will be supported by favourable monsoons, easing oil prices, and lower interest rates.
Risks include US tariffs, and weaker export demand.
Strong services exports, capex push, and policy support will cushion India’s economic outlook.
India’s macroeconomic growth trajectory shows a return to its pre-pandemic trend, averaging 6.6 per cent annually in the decade to 2020. While stimulus and a low base lifted growth to 8.8 per cent between FY22–FY24, higher inflation and fiscal normalisation moderated expansion thereafter. For FY26, the HSBC Purchasing Managers’ Index signals sustained momentum across both manufacturing and services.
Yet, challenges loom. US tariffs are likely to erode competitiveness of Indian exports, with nearly 20 per cent directed to the US, where economic growth is slowing to 1.7 per cent in 2025. The eurozone, accounting for 17.3 per cent of exports, also faces weak demand. Rising risks of low-cost imports from China further threaten domestic industries, the article added.
Despite these headwinds, buffers remain. Services exports—constituting 47 per cent of India’s total exports—are expected to provide resilience as they are less exposed to global trade shocks than goods. The current account deficit is projected to stay manageable at around 1 per cent of GDP, backed by robust foreign exchange reserves of $702.8 billion.
The government capex remains a priority, with central and state expenditure rising strongly in early FY26 despite deficit-reduction goals. Monetary easing and fiscal support are expected to provide cyclical momentum, though fiscal space remains constrained.
Looking ahead, policymakers face the dual task of sustaining growth drivers at home while navigating an uncertain global trade environment. Success in balancing domestic reforms, infrastructure investment, and foreign trade agreements will be key to India’s long-term ambition of achieving developed nation status by 2047, concluded the article.
Fibre2Fashion News Desk (SG)