India’s GDP is expected to grow 7.5 per cent in this fiscal year

India’s GDP is expected to grow 7.5 per cent in the fiscal year ending March 2026 higher than 7.4 per cent forecasted earlier, due to resilient domestic demand even as activity showed tentative slowing in January and February, a report said on Friday.

Credit rating agency Fitch Ratings said domestic demand will drive the growth, with consumer spending and investment expected to expand by 8.6 per cent and 6.9 per cent, respectively, in FY26.

High frequency indicators including GST collections, manufacturing output, air travel and digital payments indicate steady momentum despite headwinds from slowing global trade.

India’s economy ranks among few bright spots in the global landscape over the past few months, supported by resilient domestic demand, robust services activity and sustained public investment in infrastructure, according to the report.

However, the report pointed out tentative signs that real activity is slowing in January and February, such as data from PMI surveys, but maintained that the economy remains resilient and credit growth is still in double digits. “We expect growth to slow in H1FY26/27; rising inflation will constrain real incomes, limiting consumer spending growth,” it said.

India’s Q3FY26 GDP growth eased to 7.8 per cent from 8.4 per cent in the prior quarter after the country has rebased its GDP base year to 2022-23. The ratings agency said investment growth is likely to slow in the short term in India but should recover from H2FY26/27 with change in financial conditions and decline in real interest rates.

It expects growth to moderate to 6.7 per cent in FY26/27 and 6.5 per cent in FY27/28.

The ratings agency expects the global economy to grow in 2026 at 2.6 per cent, an upward revision from its December outlook, but said this depends on the recent spike in oil prices being a temporary factor.

Fitch forecasted the US economy to grow by 2.2 per cent per cent in 2026 and China’s economy to slow to 4.3 per cent from 5 per cent in 2025, over weakening consumer spending growth.

Meanwhile India is expected to contribute as much as 17 per cent to global real GDP growth in 2026 as it continues to be the world’s fastest-growing major economy, according to the latest data compiled by the IMF.

Among the other countries in the IMF’s top 10 list, the USA is expected to contribute 9.9 per cent to the world’s real GDP growth, followed by Indonesia with 3.8 per cent, Turkiye 2.2 per cent, Saudi Arabia 1.7 per cent, Vietnam 1.6 per cent, while both Nigeria and Brazil are expected to contribute 1.5 per cent each.

Germany, which is ranked at the 10th spot, is expected to contribute 0.9 per cent to the global GDP growth, while the rest of the European countries do not figure on the IMF’s top 10 list.

The International Monetary Fund (IMF) has already raised India’s economic growth projection for 2025 by 0.7 percentage points to 7.3 per cent.

In the World Economic Outlook update, the IMF said the upward revision reflects strong momentum in the fourth quarter of the current financial year ending on March 31, 2026. Meanwhile, the IMF projected 6.4 per cent growth in the next financial year of 2026-2027, adding that despite the expected moderation, India remains a key driver of growth among emerging market and developing economies.

It said global growth is projected to hold steady at 3.3 per cent in 2026, supported by easing trade tensions, accommodative financial conditions and a surge in investment linked to technology, particularly artificial intelligence. The IMF said the inflation in India is expected to go back to near target levels after a marked decline in 2025, driven by subdued food prices, offering additional support to domestic demand. However, the IMF cautioned that AI-driven productivity gains could lead to a pullback in investment and tighter global financial conditions, with spillover effects for emerging economies.

Meanwhile India’s current account deficit (CAD) stood at $13.2 billion, or 1.3 per cent of GDP, in the third quarter (October-December) of the financial year 2025-26, according to the RBI’s preliminary data on the balance of payments released on Monday. The deficit stood at $11.3 billion, or 1.1 per cent of GDP, in the corresponding quarter of the previous financial year.

The merchandise trade deficit increased to $93.6 billion in Q3FY26 from $79.3 billion a year earlier. Within the current account, goods exports amounted to $111.7 billion, while imports stood at $205.3 billion during the quarter, resulting in a net goods deficit of $93.6 billion, the data showed.

However, there was a robust increase in services exports and remittances sent back home by Indians working overseas during the quarter.

Net services receipts rose to $57.5 billion in Q3FY26 from $51.2 billion in Q3FY25. The RBI stated that services exports increased on a year-on-year basis in major categories such as computer services and other business services.

Indo-Asian News Service