India’s economy is expected to expand at a steady pace of 6.5 per cent in the financial year ending March 2026, buoyed by firm domestic consumption, easing inflation, and favourable monetary policy, according to a report released by S&P Global Ratings on Tuesday.
“India’s GDP growth holding up at 6.5 per cent in fiscal 2026 (year ending March 31, 2026)… assumes a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing,” the report noted, pointing to India’s comparative insulation from global export volatility as a buffer against a broader economic slowdown in the Asia-Pacific region.
One of the key drivers behind the growth momentum is the consistent decline in inflation, led by falling food prices. India’s wholesale inflation based on the WPI index declined to a 14-month low of 0.39 per cent in May, down from 0.85 per cent in April and 2.05 per cent in March. Similarly, retail inflation, as measured by the CPI, dropped to 2.82 per cent in May, marking the lowest reading since February 2019.
Food inflation in particular dropped to 0.99 per cent—its lowest since October 2021—reflecting better agricultural output. This has enabled the Reserve Bank of India to revise its inflation forecast for 2025-26 down to 3.7 per cent from an earlier projection of 4 per cent.
RBI Governor Sanjay Malhotra confirmed a proactive monetary policy stance: “The sharp decline in inflation has enabled the RBI to go in for a 50 basis points cut in the repo rate from 6 per cent to 5.5 per cent.”
Asia-Pacific Outlook Varies Amid External Pressures
S&P’s regional outlook suggests that while countries like India are benefiting from internal demand, others in the Asia-Pacific region may face headwinds from slowing Chinese imports and uncertainty over US trade policy.
“Domestic demand resilience is particularly relevant in limiting the economic slowdown in economies less exposed to goods exports such as India,” the report said, adding that “Asia-Pacific economies face sizable external pressure, notably from uncertain US tariff policy and soft imports in China.”
While China’s GDP is forecasted to grow at 4.3 per cent in 2025 and 4.0 per cent in 2026—below its targets—the report acknowledged that such figures would still reflect resilience amid persistent external challenges.
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Balanced Policy Approach Key To Sustained Growth
The report emphasizes the importance of calibrated fiscal and monetary measures in maintaining India’s growth trajectory while ensuring inflation remains within manageable levels. With supportive policies and easing prices, the outlook for FY26 positions India among the stronger performers in the region.
