India’s GDP
Fitch Ratings has raised India’s gross domestic product (GDP) growth forecast for FY26 to 7.4% from 6.9%, citing strong spending and the positive impact of recent GST reforms. According to the global rating agency, private consumer spending is the main driver of growth this year, supported by strong real incomes, elevated consumer sentiment and a boost to external demand from the ETR.
The estimate comes about a week after government data showed India’s GDP expanded at a six-quarter high of 8.2% in the second quarter of fiscal 2026 from 5.6% in the same quarter last year. Consumer price inflation fell to an all-time low of 0.3% in October, driven by lower food prices (-3.7% in the year to October). Food prices have been falling on an annual basis since June, due to above normal rainfall and adequate food stocks.
Core inflation has remained above 4% since February, although its recent stability is largely due to higher gold and silver prices. Base effects will push inflation above target by the end of 2026; We expect only a slight decline in 2027.
RBI will cut interest rates!
Fitch estimates that due to decreasing inflation, the Reserve Bank of India may get a chance to make another cut in policy rates in December to bring it to 5.25%. This has been possible after a cut of 100 basis points so far in 2025 and several cuts in the cash reserve ratio (from 4% to 3%). With core inflation improving and economic activity expected to remain strong, Fitch believes the central bank has reached the end of its easing cycle, and rates will remain at 5.25% for the next two years.