Fitch lifts India’s FY26 GDP forecast to 7.4 pc; consumer spending, GST reforms key drivers

New Delhi: Fitch Ratings on Thursday revised India’s GDP growth outlook for the current financial year to 7.4 per cent, up from its earlier estimate of 6.9 per cent, attributing the upgrade to stronger consumer spending and improved sentiment following recent GST reforms.

In its December Global Economic Outlook, the agency noted that India’s GDP grew by 8.2 per cent in the July–September quarter, accelerating from 7.8 per cent in the previous quarter.

Private consumption has emerged as the key driver of expansion, supported by rising real incomes, improved consumer confidence and the impact of GST reductions introduced in September. The government slashed GST on around 375 items, making more than 99 per cent of consumer goods cheaper.

Fitch expects India’s growth to moderate to 6.4 per cent in FY27 but anticipates a pick-up in private investment in the latter half of 2026–27 as financial conditions ease.

On inflation, the agency highlighted that consumer prices fell to a record low of 0.3 per cent in October, largely due to lower food and beverage costs. The sharp decline, it said, gives the Reserve Bank of India room for one additional policy rate cut in December, taking the repo rate to 5.25 per cent after 100 basis points of easing already delivered in 2025, along with reductions in the cash reserve ratio from 4 per cent to 3 per cent.

The RBI’s Monetary Policy Committee is due to announce its latest policy review on Friday. Fitch added that with core inflation stabilising and economic activity expected to remain robust, it believes the central bank has reached the end of its easing cycle and will hold rates at 5.25 per cent for the next two years.

PTI