S&P raises India FY26 GDP forecast to 6.5%, cites domestic demand, lower oil prices

S&P Global Ratings on Tuesday raised its forecast for India’s economic growth in the fiscal year ending March 2026 to 6.5%, up from 6.3%, citing expectations of a normal monsoon, lower crude oil prices, income-tax concessions, and monetary easing.

The revision is in line with the Reserve Bank of India’s projection of 6.5% growth, announced earlier this month.

In its latest Asia-Pacific Economic Outlook, S&P said domestic demand resilience is helping shield economies less exposed to goods exports, such as India, from the global slowdown.

"We see India's GDP growth holding up at 6.5 per cent in fiscal 2026 (year ending March 31, 2026). That forecast assumes a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing," S&P said.

However, S&P flagged heightened risks to the global economy due to the escalating tensions in the Middle East, warning that a sustained spike in oil prices could dampen global growth and strain current accounts in net energy-importing nations across Asia-Pacific.

"Current conditions on global energy markets--which are well-supplied-- make such long-term impact on oil prices unlikely," S&P said.

To be sure, the report was released shortly before a ceasefire between warring Iran and Israel came into effect.

India imports nearly 90% of its crude oil and about half of its natural gas needs.

S&P had trimmed India’s FY26 growth outlook to 6.3% last month, citing global uncertainties and the potential fallout from higher US tariffs. The agency reiterated concerns that rising trade protectionism and tariff uncertainty could weigh on global trade, investment, and growth.

The crisis in the Middle East has escalated over the last 12 days with US military strikes on Iran's three most critical nuclear facilities. The US joined the war against Iran after Israeli strikes and counterstrikes by Iran. However, the declaration of a ceasefire has calmed the investors’ nerves on Tuesday, which was reflected in the SENSEX and NIFTY50, jumping over 950 and 300 points, respectively.