Fitch Ratings increases India's GDP growth estimate for FY26 to 7.5%

New Delhi, Mar 13, 2026

Fitch Ratings on Friday raised India's GDP growth forecast for current fiscal and the next to 7.5 per cent and 6.7 per cent, and projected global crude oil price to average USD 70/barrel in 2026.

Fitch had, in December, projected India's GDP growth for current fiscal at 7.4 per cent and 6.4 per cent for 2026-27.

Fitch expects growth to slow in first half of FY27, with rising inflation constraining real incomes and limiting consumer spending growth.

GDP growth slowed in the December quarter to 7.8 per cent YoY from 8.4 per cent in September quarter.

"We estimate that for 2025-26 financial year (starting April 2025), growth will be 7.5 per cent, a marginal upward revision from December. Domestic demand is the biggest growth driver this year, with consumer spending and investment rising by (an estimated) 8.6 per cent and 6.9 per cent in the current fiscal year," Fitch said.

In its Global Economic Outlook- March 2026, Fitch projected world GDP growth at 2.6 per cent in 2026 on the assumption that the Iran war does not result in a larger or an enduring spike in energy prices that pushes the annual 2026 oil price forecast above USD 70/barrel. Global growth last year was 2.7 per cent.

"But a scenario where oil prices rise to USD 100 and stay there would be a significant adverse global supply shock," Fitch Ratings Chief Economist Brian Coulton said.

Fitch said oil prices have risen by USD 20/barrel to around USD 90 (Brent) since the US and Israel attacked Iran at the end of February.

Fitch's baseline assumption in the Global Economic Outlook report is that oil prices remain in the USD 90-100 range through March - as the Strait of Hormuz remains effectively closed for around a month - before falling to the mid USD 60s by second half of 2026 in a fundamentally oversupplied market.

"This implies an annual average price of USD 70 in 2026, up from USD 63 in the December GEO. We believe this revision would not have a material impact on global growth, inflation or monetary policy," Fitch said.

However, there are huge uncertainties and there is a possibility of more sustained disruptions to oil shipments and significant damage to production facilities in West Asia.

With regard to India, Fitch said there are tentative signs that real activity is slowing in January and February, but the economy remains resilient, and credit growth is still in double digits.

A comprehensive revision of national accounts data including a rebasing of the base year to 2022-23, from 2011-12 earlier, has resulted in a smoother path for real GDP, with growth in 2023-24 and 2024-25 now estimated at 7.2 per cent and 7.1 per cent, respectively, rather than 9.2 per cent and 6.5 per cent in the previous national accounts.

Fitch said it expects investment growth to ease in the short-term but recover in sequential terms from second half of next fiscal with looser financial conditions and lower real interest rates.

The government's budget forecasts public capital expenditure to rise in line with nominal GDP growth.

Weaker domestic demand will affect imports, translating into a positive net trade contribution to growth. At the margin, a lower US ETR (effective tax rate) following the US Supreme Court decision and the Section 122 blanket tariffs will support external demand.

"We expect overall GDP growth to slow to 6.7 per cent in FY26-27 and to 6.5 per cent in FY27/28 (these forecasts are revised upwards by 0.3 percentage points from the December GEO)," Fitch said.

Headline inflation has started to build from the lows associated with falling food prices last autumn, reaching 2.7 per cent in January, up from 1.2 per cent in December.

"We expect inflation to rise steadily to 4.5 per cent by December 2026. Persistently higher oil prices could cause inflation to rise faster than the expected gradual pace.

The Reserve Bank of India's policy committee kept the policy rate at 5.25 per cent in February and reaffirmed a neutral stance for monetary policy. "We expect interest rates to remain at this level this year and next," Fitch added.

[Press Trust of India]