S&P Global Ratings has cut its economic growth projections for India over the next two fiscal years, citing the impact of elevated interest rates and diminished fiscal support on urban demand.

In its latest Asia-Pacific economic outlook, the agency forecast India’s GDP to grow by 6.7 per cent in the 2025-26 financial year (April 2025 to March 2026) and 6.8 per cent in 2026-27, down from the previous estimates of 6.9 per cent and 7 per cent, respectively. For the ongoing fiscal year ending March 2025, growth is expected to ease to 6.8 per cent.

“In India, GDP growth is expected to ease as high interest rates and a lower fiscal impulse weigh on urban demand. While purchasing managers’ indices remain firmly in expansion territory, other high-frequency data point to a temporary softening in growth momentum, partly due to a hit to the construction sector in the September quarter,” S&P said.

Despite the near-term moderation, the agency projected India’s GDP growth to reach 7 per cent by FY28.