Fitch Revises India’s GDP Outlook For FY26 To 6.9% From 6.5%

Fitch Ratings has upgraded India's growth forecast for FY26 to 6.9% due to robust domestic demand and a strong GDP growth of 7.8% in Q1 FY2025-26. Future projections indicate a gradual slowdown, yet domestic demand remains pivotal.

Fitch Ratings has revised India's growth forecast for FY26, raising it to 6.9% from the earlier 6.5%. This adjustment is attributed to robust domestic demand and favourable financial conditions. The revision follows an unexpected GDP growth of 7.8% in the first quarter of FY2025-26, surpassing the previous quarter's 7.4% growth, Reuters reported.

Future Growth Projections

Looking ahead, Fitch anticipates a gradual slowdown in India's growth rate, predicting it will ease to 6.3% in FY27 and further to 6.2% in FY28. Despite this deceleration, domestic demand is expected to remain a key driver of economic activity, although its momentum may not be as strong in the latter half of FY26.

The Ministry of Statistics & Programme Implementation said that real GDP grew by 7.8% in Q1 of FY2025-26 compared to a 6.5% increase during the same period in the previous year. In terms of constant prices, real GDP for Q1 FY2025-26 was estimated at Rs 47.89 lakh crore, up from Rs 44.42 lakh crore in Q1 FY2024-25.

Sectoral Performance

The agriculture and allied sectors experienced a real GVA growth rate of 3.7%, significantly higher than the 1.5% growth recorded in the same quarter last year. Meanwhile, secondary sectors like manufacturing and construction saw impressive growth rates of 7.7% and 7.6%, respectively.

However, not all sectors performed equally well. The mining and quarrying sector faced challenges with a decline of -3.1%, while electricity, gas, water supply, and other utility services posted a modest growth rate of just 0.5% during Q1 FY2025-26.

Tertiary Sector Insights

The tertiary sector stood out with a substantial growth rate of 9.3% at constant prices in Q1 FY2025-26, compared to a 6.8% increase during the same period last year. This sector's performance highlights its significant contribution to overall economic growth.

Despite these positive indicators, Fitch has highlighted potential risks that could impact India's projected growth trajectory, including rising tensions with the US that might affect investor sentiment even if customs duties are reduced through negotiations.

Nominal GDP, which accounts for inflation effects, grew by 8.8% in Q1 FY2025-26, reflecting both price changes and real output increases within the economy.