India’s GDP Growth Slowing Down? S&P Global Ratings Says…

India’s GDP Growth: On Monday, S&P Global Ratings trimmed down its estimate for India’s economic growth forecast for the next two financial years as the interest rates continue to remain high along with lower fiscal impulse temper urban demand.

In an update to the economic forecast for the Asia-Pacific Economies, the American credit ratings agency has shared a new estimated growth rate of 6.7 per cent for India’s GDP for the 2025-26 financial year (April 2025 to March 2026) and 6.8 per cent in the following fiscal year. In the post-Donald Trump win assessment in the US Presidential elections, estimates for India slid down from 6.9 per cent to 7 per cent.

For the current financial year (FY2025), the rating agency has pegged the GDP growth rate at 6.8 per cent.

PMI Remains Steady, Transitionary Softening Noted: S&P Global

In the assessment, S&P Global Ratings mentioned that even though the purchasing manager indices in the country are steadily expanding, some high-frequency indicators indicate ‘transitory softening.’

"In India we see GDP growth easing to 6.8 per cent this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter," the report stated.

However, the rating agency predicts that India's economy will grow at 7 per cent in FY28.

S&P Retains Growth Projections For China

S&P has maintained its 2024 growth projection for China at 4.8 per cent but revised its forecasts for the following years. The 2025 estimate has been lowered to 4.1 per cent from 4.3 per cent, and the 2026 projection has dropped to 3.8 per cent from 4.5 per cent.  

A report titled Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon underlines challenges arising from potential shifts in the US administration. "US tariff increases on China are becoming more likely, and potential changes in the US macroeconomic landscape are altering interest rate expectations," the report noted.  

Louis Kuijs, Chief Economist for Asia-Pacific at S&P Global Ratings, observed that rising risks are clouding the region's economic outlook. "While much of the region should maintain solid growth, central banks are likely to act cautiously and avoid cutting policy rates too quickly," he said.  

S&P expects China’s stimulus measures to bolster its economy but warns of the adverse effects of US trade tariffs on Chinese exports. Meanwhile, growth across the Asia-Pacific region is expected to face headwinds from weakened global demand and evolving US trade policies. However, easing inflation and lower interest rates may help mitigate the impact on consumer spending power.

(With PTI inputs)