India's economy is expected to grow 6.5% in the ongoing financial year (FY26), as underpinned by robust domestic consumption, a normal monsoon season, and a relaxation in monetary policy, as per a report published by S&P Global Ratings on Tuesday.
The report noted that India's relatively narrow dependence on merchandise exports supports its capacity to resist global economic slowdowns, with domestic demand emerging as a stabilizing force.
We expect India's GDP growth to remain at 6.5 per cent in fiscal 2026 (year up to March 31, 2026). That assumption is based on a normal monsoon, softer crude oil prices, tax-income relief and monetary easing," the report on trends in Asia-Pacific economies said.
S&P observed that falling food prices are continuing to soften overall inflation in India.
Support. for this narrative comes from recent numbers. Wholesale inflation, as recorded through the Wholesale Price Index (WPI), fell to 0.39% in May, a 14-month low, from 0.85%. in April and 2.05%. in March.
Likewise, retail sales inflation. - based on Consumer Price Index (CPI) - in May fell to 2.82% year-on-year, the lowest since February. 2019, as per official data. released last week.
Food inflation, in fact, slowed to 0.99% in May, a record low since October 2021. This ongoing fall is the seventh consecutive monthly drop, largely due to better agricultural harvests.
To the decline in cooling inflationary pressures, the Reserve Bank of India (RBI) has reduced its 2025–26 inflation forecast to 3.7% from 4%, RBI Governor Sanjay Malhotra stated on Friday. This change has provided the central bank with space to reduce the benchmark repo rate by 50 basis points — from 6% to 5.5% — as part of its latest monetary policy action designed to boost economic activity.
S&P Global Ratings further noted that a number of Asia-Pacific nations were supported by robust domestic demand early in 2025. A few economies received a temporary boost from a pre-peak export boom to the U.S., which was boosted by anticipation of impending tariffs. For India, growth picked up pace after a modest dip.
S&P currently predicts China's GDP to increase by 4.3% in 2025 and 4.0% in 2026.
While it is well below the government's target for this year, it would be a good result considering the external pressures. Chinese imports will be muted next year and this year but not as soft as exports," the report said.
It also warned that countries in the Asia-Pacific region are facing considerable external pressures, including unclear U.S. tariff strategies and weakening Chinese import appetite.
We anticipate domestic demand to generally stay healthy, partly due to policy loosening. But how this translates into the resilience of regional economies differs sharply, with those reliant on export being less well placed," it added.
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