India Ratings & Research (Ind-Ra) Lowers India’s FY26 GDP Forecast to 6.3%, Citing Global Uncertainty and Weaker Investment Climate.
Economy Business
In July 2025, India Ratings and Research (Ind-Ra), a wholly owned subsidiary of Fitch Group, has recently revised down India’s Gross Domestic Product (GDP) growth forecast for FY2025-26 to 6.3%, reducing it by 30 basis points from its earlier projection of 6.6% made in December 2024.
- India Ratings cited both domestic and global challenges, including tariff hikes by the United States and a weaker investment environment, as key reasons for this downward revision. Despite the downgrade, positive factors such as easing inflation and strong rainfall projections are expected to cushion the economic impact in the coming fiscal year.
- The agency outlined significant headwinds, including rising global uncertainties from the US's unilateral tariff hikes affecting multiple economies and a weaker investment climate, both of which may dampen private and institutional investor confidence in India.
- However, tailwinds such as expected monetary easing, a sharper-than-expected decline in inflation, and above-normal monsoon predictions for 2025 have been highlighted. Ind-Ra stated that these positive developments could offset the adverse impact of global headwinds to some extent.
Main Point :- (i) On the retail inflation front, Ind-Ra has revised its forecast for FY26 to 3%, down from the earlier projection of 4.3%. This revision is backed by CPI-based inflation having dropped to 2.1% in June 2025, staying well below the Reserve Bank of India’s (RBI’s) 4% target range.
(ii) Private consumption is expected to grow steadily, with Ind-Ra projecting Private Final Consumption Expenditure (PFCE) to rise 6.9% Year-on-Year (YoY) in FY26. This projection reflects improving consumer sentiment following a decline in inflationary pressure.
(iii) Regarding investment demand, Gross Fixed Capital Formation (GFCF) is now expected to grow at 6.7% in FY26, which is lower than the earlier estimate of 7.2%. Ind-Ra noted that this decline signals cautious sentiment among corporate and infrastructure investors amid global trade and policy uncertainties.
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