Fitch raises India GDP growth projection to 6.9% on strong demand

New Delhi: Rating agency Fitch has raised India’s GDP growth projection for the current financial year to 6.9% from earlier forecast of 6.5% citing strong domestic consumption-led demand and better-than-expected Q1 numbers.

In the April-June quarter India’s gross domestic product (GDP) growth accelerated to 7.8%, beating the government as well as the private agencies’ forecasts. Fitch had pegged Q1 growth at 6.7%.

In its Global Economic Outlook (GEO) September update, Fitch noted that domestic demand supported by strong real income dynamics and looser financial conditions would remain the key drivers of economic growth.

However, the rating agency said that the growth would slow down in the second half of the current financial year.

“Annual growth will slow in the second half of the financial year, and so we expect growth to slow in FY27 to 6.3%. With the economy operating slightly above its potential, we expect growth will edge down to 6.2% in FY28” the rating agency noted in its report.

Fitch’s projection on India’s economic growth for the current financial year is higher than most other estimates. The International Monetary Fund (IMF) has pegged it at 6.4% while the World Bank’s projection is slightly lower at 6.3%. The Reserve Bank of India (RBI) has pegged it at 6.5%.

On the US tariffs, Fitch said the uncertainty around trade relations would dampen business sentiment and investment. US President Donald Trump's administration has imposed 50% tariffs on the majority of Indian products. Fitch said the tariffs rates are expected to be lowered through negotiations between the two countries.

“The government has adopted reforms to the Goods and Services Tax to be effective from September 22, which should modestly boost consumer spending over the remainder of this and the next fiscal years," Fitch said.

Meanwhile, Chief Economic Advisor (CEA) V Anantha Nageswaran said the economic reforms undertaken by the central government would cushion the economy from the negative impact of global trade uncertainty.

Apart from the Goods and Services Tax (GST) rate rationalisation, Nageswaran cited the Insolvency and Bankruptcy Code, the Real Estate (Regulation and Development) Act and consolidation of public sector banks as the key reform measures that have improved the business environment in the country.

Speaking at an event organised by the All India Management Association (AIMA), Nageswaran clarified that India was not considering joining any global effort to develop a currency alternative to the US dollar.

On India’s monetary policy, Fitch said, “we still expect the Reserve Bank of India (RBI) to cut rates by 25 basis points (bps) towards the end of the year, as it assesses the impact of the policy loosening already implemented, and that rates will stay there until end-2026. We expect the RBI to start raising rates in 2027.”

The RBI kept the key policy interest rates unchanged in August after reducing it cumulatively by 100 basis points in the previous three Monetary Policy Committee (MPC) meetings. The next meeting of the RBI is scheduled in October.