Fitch ratings raise India’s GDP growth forecast to 7.5% for FY26, sees Oil at $70 in 2026

New Delhi: Fitch Ratings on Friday revised its forecast for India’s economic growth for the current fiscal year and the next, projecting GDP expansion of 7.5 per cent in FY26 and 6.7 per cent in FY27. The agency also estimated that global crude oil prices could average USD 70 per barrel in 2026.

In its previous outlook released in December, Fitch had projected India’s GDP growth at 7.4 per cent for FY26 and 6.4 per cent for FY27.

The rating agency noted that while India’s economy remains resilient, growth could moderate in the first half of FY27 as rising inflation pressures real incomes and curbs consumer spending.1

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India’s GDP growth slowed in the December quarter, expanding 7.8 per cent year-on-year, compared with 8.4 per cent in the September quarter.

"We estimate that for 2025-26 financial year (starting April 2025), growth will be 7.5 per cent, a marginal upward revision from December. Domestic demand is the biggest growth driver this year, with consumer spending and investment rising by (an estimated) 8.6 per cent and 6.9 per cent in the current fiscal year," Fitch said.

In its Global Economic Outlook – March 2026, Fitch projected global GDP growth at 2.6 per cent in 2026, assuming that the ongoing conflict involving Iran does not cause a prolonged spike in energy prices, pushing oil above USD 70 per barrel for the year. Global growth stood at 2.7 per cent in the previous year.

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However, Fitch warned that significantly higher oil prices could disrupt global economic stability.

"But a scenario where oil prices rise to USD 100 and stay there would be a significant adverse global supply shock," Fitch Ratings Chief Economist Brian Coulton said.

According to the report, oil prices have already surged by around USD 20 per barrel to nearly USD 90 (Brent) since the United States and Israel launched attacks on Iran in late February.

Fitch’s baseline assumption is that crude prices may remain in the USD 90–100 range through March, partly due to disruptions in the Strait of Hormuz, before easing later.

"This implies an annual average price of USD 70 in 2026, up from USD 63 in the December GEO. We believe this revision would not have a material impact on global growth, inflation or monetary policy," Fitch said.

Still, the agency cautioned that uncertainties remain high, including the risk of sustained disruptions to oil shipments and potential damage to energy production facilities in West Asia.

On India’s economic outlook, Fitch said there are tentative signs of slowing activity in January and February, although the broader economy continues to show resilience, supported by strong credit growth.

The agency also pointed to a comprehensive revision of national accounts data, which rebased the base year to 2022–23 from 2011–12, resulting in a smoother growth trajectory. Under the revised estimates, India’s GDP growth for 2023–24 and 2024–25 is now pegged at 7.2 per cent and 7.1 per cent, respectively.

Fitch expects investment growth to moderate in the near term, but sees a recovery from the second half of the next fiscal year, aided by easier financial conditions and lower real interest rates. Government capital expenditure is also expected to increase broadly in line with nominal GDP growth.

The report added that weaker domestic demand may reduce imports, resulting in a positive contribution from net trade to overall growth.

"We expect overall GDP growth to slow to 6.7 per cent in FY26-27 and to 6.5 per cent in FY27/28 (these forecasts are revised upwards by 0.3 percentage points from the December GEO)," Fitch said.

Inflation, which fell sharply due to declining food prices last year, has started to pick up again. Headline inflation rose to 2.7 per cent in January, compared with 1.2 per cent in December.

"We expect inflation to rise steadily to 4.5 per cent by December 2026. Persistently higher oil prices could cause inflation to rise faster than the expected gradual pace."

Meanwhile, the Reserve Bank of India kept its policy rate unchanged at 5.25 per cent in February while maintaining a neutral monetary policy stance.

"We expect interest rates to remain at this level this year and next," Fitch added.