India’s GDP Growth Forecast Raised to 7.5% for FY26 on Strong Domestic Demand: Fitch
New Delhi: India’s economy is projected to grow 7.5 per cent in the fiscal year ending March 2026, slightly higher than the earlier forecast of 7.4 per cent, driven largely by resilient domestic demand despite signs of slowing activity earlier this year, according to a report by global credit rating agency Fitch Ratings.
The report highlights that consumer spending and investment will remain key engines of growth for the Indian economy in the coming fiscal year.
Domestic Demand Continues to Power Growth
According to Fitch, India’s growth outlook remains strong due to robust consumption patterns and sustained investment activity.
The agency expects:
- Consumer spending to expand by 8.6 per cent in FY26
- Investment growth to rise by 6.9 per cent
These factors are expected to offset uncertainties in global markets and support India’s position as one of the fastest-growing major economies.
The report noted that high-frequency economic indicators such as Goods and Services Tax (GST) collections, manufacturing output, air travel demand and digital payment transactions continue to signal stable economic momentum.
India Remains a Bright Spot in Global Economy
Fitch described India as one of the few bright spots in the global economic landscape in recent months.
The country’s economic performance has been supported by:
- Strong domestic consumption
- Growth in the services sector
- Continued government investment in infrastructure
These factors have helped shield the economy from the slowdown seen in several major global markets.
Signs of Temporary Slowdown in Early 2026
Despite the positive outlook, the report also flagged early indications of moderation in economic activity during January and February.
Survey data from Purchasing Managers’ Index (PMI) readings showed some signs of slower real activity during the period.
However, Fitch maintained that the underlying fundamentals remain strong, noting that credit growth in the banking sector continues to remain in double digits, supporting business expansion and consumption.
Recent GDP Data Reflects Strong Momentum
India’s economic growth in the third quarter of FY26 was recorded at 7.8 per cent, slightly lower than 8.4 per cent in the previous quarter.
The data follows the government’s recent rebasing of GDP calculations to the base year 2022–23, which has adjusted the measurement of economic output.
While the report expects investment growth to soften in the short term, it believes the trend could improve later as financial conditions become more favourable.
Growth Expected to Moderate After FY26
Looking ahead, Fitch expects India’s economic expansion to gradually moderate over the next two fiscal years.
The agency projects:
- 6.7 per cent GDP growth in FY27
- 6.5 per cent growth in FY28
It warned that rising inflation may limit real household incomes, potentially slowing consumer spending in the future.
“We expect growth to slow in H1FY26/27; rising inflation will constrain real incomes, limiting consumer spending growth,” the report said.
Global Economic Outlook
Fitch also revised its outlook for the global economy, projecting 2.6 per cent growth in 2026, slightly higher than its earlier forecast.
However, the agency cautioned that this outlook depends on the recent surge in global oil prices being temporary.
For major economies, Fitch expects:
- United States: GDP growth of 2.2 per cent in 2026
- China: Economic growth slowing to 4.3 per cent, down from 5 per cent in 2025, largely due to weaker consumer demand.
Our Final Thoughts
Fitch’s upgraded forecast reinforces India’s position as one of the world’s fastest-growing major economies, driven primarily by domestic demand and infrastructure investment. However, the outlook also highlights emerging challenges such as inflation pressures and global economic uncertainty that could influence growth in the coming years.