India’s economy is expected to grow 6.5% in FY25-26, making it one of Asia-Pacific’s fastest-growing economies, according to S&P Global Ratings. The agency states that strong domestic demand, favourable monsoon conditions, tax cuts, and increased government investment are helping to offset global trade pressures and higher US import tariffs.

India has faced a sharper rise in US tariffs than many of its Asian peers, which could harm its export competitiveness and plans to become a manufacturing hub. Even so, GDP grew 7.8% in the June 2025 quarter, driven mainly by public investment.

Inflation has eased sharply, with S&P cutting its forecast for FY25-26 to 3.2% from 4.6%. This gives the Reserve Bank of India room to cut the repo rate by 25 basis points to 5.25% by March 2026.

The rupee has weakened to around Rs 88 per dollar, reflecting trade challenges and risks of imported inflation. Meanwhile, competition from Chinese exporters is rising as China pushes cheaper goods into Asian markets.

S&P projects India’s growth at 6.7% in FY26-27, 7.0% in FY27-28, and 6.8% in FY28-29, keeping the country a regional bright spot even as Asia-Pacific growth slows to 4.4% in 2025 and 4.0% in 2026.

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