S&P and Fitch raise India's growth forecasts, expects RBI to hike rates by 25bps

S&P raised its projection to 7% and Fitch to 6.9%, citing strong economic activity, while both flagged inflation and energy costs as risks.

Published on: Sep 23, 2026, 14:56:16 IST

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Global rating agencies S&P and Fitch on Wednesday raised India's FY27 GDP growth projection to 7 per cent and 6.9 per cent, respectively, boosted by robust June quarter economic activity, and said inflationary pressures will push the Reserve Bank to hike policy interest rates by at least 25 basis points in the current year.

Asian Development Bank (ADB) has also raised India's FY27 growth forecast to 7 per cent, from 6.6 per cent estimated in July.

The growth upgrades by the three global agencies came close on the heels of US-based Moody's Ratings raising GDP growth forecast for the fiscal year to 7 per cent, making India the fastest growing among all G20 economies.

The Indian economy grew higher than expected at 7.8 per cent in the June quarter, driven by robust industrial activity, healthy consumption, strong goods exports, and accelerating government investment. But a slower pace of expansion in both manufacturing and services and below-normal monsoon rains is likely to moderate growth over the remaining part of the fiscal year ending March 31, 2027.

In its Economic Activity for Asia Pacific report, S&P upgraded India's GDP growth forecast for the current fiscal year to 7 per cent, from 6.6 per cent previously, and projected consumer inflation to average 5.1 per cent in FY27.

Growth is expected to ease in the second half of the fiscal year as the tailwinds from Goods and Services Tax (GST) rationalisation and income tax cuts diminish, it added.

"Our projection for strong (Asia Pacific) growth doesn't mask the challenges. Energy prices are likely to remain high in coming months, and monetary tightening in the US will be a hurdle. There is also a risk that AI investment weakens," S&P said, while hiking FY'27 GDP growth forecast for the region by 20 basis points to 4.6 per cent.

In its Global Economic Outlook, Fitch Ratings said that growth in India remains "very strong" with "very robust" dynamism despite the oil price shock.

Fitch said, looking ahead, private investment prospects look more buoyant, and estimates investment to rise by more than 10 per cent. "Overall GDP growth will be 6.9 per cent (revised up from 6.4 per cent in June)," Fitch said.

RBI expects FY'27 growth at 6.7 per cent.

The Indian economy grew at 7.8 per cent in the previous fiscal year (2025-26).

Fitch expects inflation to increase in the short term, with headline inflation at 5.5 per cent in December this year. Inflation is projected to ease back towards the RBI target and be 4.2 per cent by end-2027, it added.

"Given the combination of strong demand, price rises, and adverse supply developments, we expect the RBI to raise rates by 25bps in October this year to 5.5 per cent. We then expect a further rise to 5.75 per cent in early 2027 and then for rates to ease back to 5.5 per cent in 2028," Fitch said.

Fitch expects the Indian rupee exchange rate against the dollar to remain close to current levels for the rest of the year, and to depreciate slightly next year.

"World growth is holding up well in the face of the energy price shock, but real interest rates are rising," Fitch said, while raising its global GDP growth forecast by 20 bps to 2.6 per cent.

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