S&P Boosts India’s FY26 GDP Growth Forecast to 6.5%: What This Means for the Rupee and Inflation

New Delhi: S&P Global Ratings recently revised its forecast for India’s GDP growth to 6.5% for the current fiscal year. This adjustment comes amid lower crude oil prices, monetary easing policies, and a favorable monsoon season. Interestingly, ongoing geopolitical issues are not expected to cause major disruptions to the rupee or inflation.

Vishrut Rana, an economist at S&P, highlighted that energy prices are significantly lower than they were a year ago. For instance, Brent crude oil was around $85 per barrel last year, while current prices are notably less. This decrease offers a buffer against rising costs. Rana mentioned, "While energy prices may see a slight increase, food prices could influence inflation more directly. We don’t foresee significant pressure on the Indian rupee or inflation rates."

India depends heavily on oil imports, sourcing over 85% of its crude and about half of its natural gas. A significant chunk, more than 40%, comes from the Middle East.

On a related note, Brent crude prices dropped to around $69 a barrel after a ceasefire was declared between Israel and Iran. The tensions had escalated for 12 days, with military strikes from both sides, including U.S. involvement in targeting Iran’s nuclear facilities.

S&P’s quarterly report also noted that the current global energy market is stable, suggesting that any long-term spikes in oil prices are unlikely. Domestic demand in India is expected to hold strong, helping to cushion any economic slowdown, unlike markets more reliant on exports.

Previously in May, S&P had lowered India’s FY26 growth estimate by 20 basis points to 6.3% due to uncertainties surrounding global events, including U.S. tariff policies. Now they project 6.5% growth, assuming steady monsoon conditions, continued low energy prices, and supportive fiscal measures. For FY27, the growth is forecasted to rise slightly to 6.7%.

In the previous fiscal year, India’s economy grew by 6.5%. The Reserve Bank of India also aligns with S&P’s growth estimates. Inflation in India is expected to average around 4% in 2025, down from 4.6% in 2024, while the rupee may weaken slightly by the end of 2025.

On the trading front, the Indian rupee opened at ₹86.13 against the US dollar, gaining 65 paise. Rana acknowledged that ongoing geopolitical tensions could lead to currency fluctuations, though the lower energy costs serve as a stabilizing factor.

In conclusion, while global uncertainties persist, India’s economic resilience appears promising, propelled by favorable conditions domestically. Maintaining this momentum will be crucial as the world grapples with complex external challenges.

For further details on S&P’s findings, you can check the latest economic outlook here.

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INDIA FY26 GDP GROWTH, ASIA PACIFIC ECONOMIC OUTLOOK, MIDDLE EAST TENSIONS, S&P UPS INDIA'S FY26 GDP GROWTH ESTIMATES TO 6.5 PC, SEES NO SIGNIFICANT MOVEMENT ON INR, INFLATION