Fitch Ratings predicts that India's GDP will expand by 6.5% in 2025-26, with a slight decrease to 6.3% growth in 2026-27.

“More aggressive-than-expected US trade policies are an important risk to our forecast, though India is somewhat insulated given its low reliance on external demand,” the ratings agency said in its ‘Global Economic Outlook – March 2025’ report.

Fitch's forecast for FY26 is 20 basis points (bps) lower than the Reserve Bank of India (RBI) prediction of 6.7%, but still within the range outlined by the Economic Survey (6.3-6.8%). For FY25, the agency projects GDP growth at 6.3%.

Furthermore, Fitch noted that GDP growth rebounded to 6.2% in Q3FY25, up from 5.4% in Q2, driven by both private and public spending, including capital expenditures, contributing to the growth rate acceleration, Financial Express reports.

“The contribution of agriculture to growth has increased over the financial year as above-average monsoon rains boosted kharif crop production,” it added.

Fitch stated that business confidence remains strong, and lending surveys indicate that bank lending to the private sector will continue to grow in double digits.

The Union Budget suggests sustained high levels of public capital expenditure, and while the agency believes the Budget will have a broadly neutral impact on growth, it remains optimistic about the outlook.

“These factors — together with a reduction in the cost of capital — underpin our expectation of a pick-up in capital spending for FY26 and FY27,” Fitch stated.

In addition, the agency highlighted that in recent months, consumer confidence has slightly declined, and vehicle sales have significantly slowed.

However, Fitch noted that lower inflation is expected to boost real incomes, and labour market indicators, both from official data and PMI surveys, suggest steady employment growth and higher participation.

Moreover, the Budget increased tax-free income allowances and adjusted tax brackets, which will result in higher post-tax incomes.

“These factors will support consumer spending growth, albeit at a slower rate than this year,” the agency said.