India’s economy is projected to grow by 6.5% in the current financial year (FY26) and 6.7% in the following year, supported by robust domestic demand, tax cuts, and accommodative monetary policy, according to S&P Global Ratings’ latest Economic Outlook for the Asia-Pacific region.

The agency highlighted that India continues to maintain strong momentum despite global challenges, with consumption remaining the key driver of growth. Real GDP grew 7.8% in the April–June quarter, the fastest pace in five quarters, with official Q2 FY26 figures scheduled for release on 28th November.

“We anticipate that India’s GDP will grow by 6.5% in fiscal year 2026 and 6.7% in fiscal 2027, with risks evenly balanced. Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs,” S&P said.

The Reserve Bank of India (RBI) projects GDP growth of 6.8% for FY26, up from last year’s 6.5% expansion.

S&P noted that if India successfully secures a trade agreement with the United States, it could help reduce uncertainty and bolster confidence, particularly in labour-intensive sectors.

Furthermore, S&P added that recent measures, such as GST rationalisation, income-tax cuts, and interest rate reductions, are expected to boost purchasing power and shift the economy’s growth composition more toward consumption rather than investment.

In the Union Budget for 2025–26, the government increased the income-tax rebate limit from ₹7 lakh to ₹12 lakh, providing middle-class relief estimated at ₹1 lakh crore, Business World reports.

Meanwhile, the RBI lowered its policy rate by 50 basis points in June, bringing it to a three-year low of 5.5%.

In addition, GST rates on roughly 375 items were reduced starting 22nd September, making a broad range of mass-consumption goods more affordable.

S&P also observed that high US tariffs on Indian goods continue to pressure export-oriented manufacturing, although there are early indications that Washington may ease some of these duties.

The report added that governments and companies are dedicating considerable time to negotiating tariff exemptions, cautioning that this diverts focus from initiatives aimed at boosting productivity.