S&P Global Ratings on Tuesday maintained its forecast for India’s economic growth at 6.8 per cent for the current fiscal year.

The ratings agency also expects the Reserve Bank of India (RBI) to start lowering interest rates in its October monetary policy review.

S&P Global Ratings also retained its GDP growth forecast for the 2025-26 fiscal at 6.9 per cent.

“In India, GDP growth moderated in the June quarter as high interest rates temper urban demand, in line with our projection of 6.8 per cent GDP for the full fiscal year 2024-2025,” S&P said.

The Indian economy grew 8.2 per cent in the last fiscal.

S&P said the Union budget in July showed the government remained committed to fiscal consolidation and to keep the focus of public expenditure on infrastructure.

The budget has earmarked a capex of ₹11.11 lakh crore for the current fiscal.

Despite a slowdown in GDP growth during the June quarter, S&P believes that India’s strong economic performance will allow the RBI to focus on bringing inflation in line with its target.

The government’s commitment to fiscal consolidation and infrastructure spending will support growth.

However, S&P notes that food inflation remains a hurdle for rate cuts. Unless there is a sustained decline in food prices, it will be difficult for the RBI to maintain headline inflation at 4 per cent.

“Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have pencilled in two rate cuts this fiscal year,” S&P said.

S&P expects inflation to average 4.5 per cent in the current fiscal. The RBI is expected to announce its monetary policy decision on October 9. The central bank has held its benchmark interest rate steady at 6.5 per cent since February 2023.

The Indian economy has been resilient despite global headwinds. However, rising interest rates and inflationary pressures have posed challenges to growth.