Arya News - The ratings agency noted that tax cuts and monetary policy easing will provide a boost to consumption-driven growth.
NEW DELHI – India’s economy is expected to grow by 6.5 per cent in the current fiscal year and 6.7 per cent in the next, according to S&P Global Ratings. The ratings agency noted that tax cuts and monetary policy easing will provide a boost to consumption-driven growth.
In its Economic Outlook Asia-Pacific report, S&P Global stated that India’s real gross domestic product (GDP) is estimated to have grown at the fastest pace in five quarters, at 7.8 per cent in the April to June period of the current fiscal year.
“We anticipate that India’s GDP will grow by 6.5 per cent in fiscal year 2026 (ending March 2026) and 6.7 per cent in fiscal 2027, with risks evenly balanced. Domestic growth remains robust, driven by strong consumption, despite the impact of US tariffs,” the report highlighted.
S&P further said that if India can secure a trade agreement with the US, it will reduce uncertainty and enhance confidence, which would boost labour-intensive sectors.
The report said the lowered goods and service tax (GST) rates will support middle-class consumption and complement income tax cuts and interest rate reductions introduced this year.
“These changes are likely to make consumption a greater driver of growth compared with investment in this fiscal year and the next,” the report added.
S&P further said the spike in the effective US tariff on India is weighing on the expansion of export-oriented manufacturing in the country.
“The US’s new approach to trade policy is causing governments and firms to spend time and money on negotiating for exemptions, consequently diverting attention from efforts to raise productivity,” S&P added.
Notably, the Union Government in its budget for the 2025-26 fiscal year has hiked the I-T rebate to Rs 12 lakh, from Rs 7 lakh, which gave tax relief of Rs 1 lakh crore to the middle class.
The Reserve Bank of India in June also cut key policy rates by 50 basis points to a 3-year low of 5.5 per cent.