S&P Global Ratings on Tuesday raised India’s GDP growth forecast for the current financial year to 6.5%, citing favourable macroeconomic factors such as lower crude oil prices, the prospect of monetary easing, and expectations of a normal monsoon.
In its latest Asia-Pacific Economic Outlook, the ratings agency expressed confidence that geopolitical tensions — particularly those in the Middle East — are unlikely to exert significant pressure on the rupee or inflation in India.
While S&P acknowledged that the escalating conflict in the Middle East poses risks to the global economy, it added that the impact on India and other countries in the region would depend on the duration and severity of oil price increases.
S&P Global Ratings Economist Vishrut Rana told PTI a key mitigating factor of India is that energy prices are still lower than last year – Brent crude oil traded at roughly $85/barrel a year ago and current prices are still lower.
“This will help contain both current account outflows and domestic energy price pressures — while energy prices may rise moderately, the path of food prices will have a higher impact on inflation. Overall, we do not expect significant pressure on the Indian rupee or inflation,” Rana said.
India imports more than 85% of its crude oil and roughly half of its natural gas requirement. More than 40% of the oil imports and half of gas imports come from the Middle East.
Rates of the benchmark Brent crude futures fell to around $69 a barrel on Tuesday morning after US President Donald Trump announced that Israel and Iran have agreed to a ‘complete and total ceasefire’.
Israel and Iran have been at war over the past 12 days with Israeli military strikes, followed by counterstrikes by Iran. US, too, joined the war with military strikes on Iran’s three most critical nuclear facilities.
S&P in its quarterly report on Asia Pacific economies said current conditions on global energy markets–which are well-supplied– make long-term impact on oil prices leading to price rise unlikely.
The US-based rating agency said domestic demand resilience would limit the economic slowdown in economies, like India, which are less exposed to goods exports. In May, it had cut India’s FY26 growth estimates by 20 basis points to 6.3% citing global uncertainties and US tariff shocks.
“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. For fiscal 2027, GDP growth is projected at 6.7%.
In the financial year 2025 fiscal, Indian economy grew 6.5%.
S&P’s FY26 growth estimates for India is in line with the projections made by central bank RBI earlier this month at 6.5%.
S&P estimates inflation in India to average 4% in 2025, down from 4.6% in 2024.
It forecasts rupee to weaken to 87.5 a dollar by the end of 2025, from 86.6 at 2024-end.
The Indian rupee opened at Rs 86.13 against the US dollar in morning trade on Tuesday, up 65 paise over its previous close.
Rana also said heightened risk-aversion in global financial markets due to ongoing geopolitical tensions may cause Rupee volatility.
In addition, higher oil prices may lead to higher current account outflows for India and contribute to a weaker Indian rupee.
“However, a key mitigating factor is that energy prices are still lower than last year,” Rana added.
To a query on the impact of conflict on GDP growth, Rana said the impact on growth prospects for the world is modest for now, but prolonged geopolitical tensions are a risk to growth.
S&P expects the increase in US import tariffs and the uncertainty about them to harm trade, investment and growth globally.
S&P Global Ratings Asia-Pacific Chief Economist Louis Kuijs said Asia-Pacific economies face sizable external challenges, from uncertain US tariff policy and soft imports in China.
“We expect domestic demand to remain relatively resilient. The extent to which resilient domestic demand can limit a slowdown this year and next varies across the region, with the export-dependent economies more at risk,” Kuijs said.
(With inputs from PTI)
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