S&P Global Ratings on Tuesday upped India’s GDP growth forecast for the current fiscal to 6.5 per cent, citing lower crude prices, monetary easing and normal monsoon, and said the ongoing geopolitical tensions are unlikely to put a “significant pressure” on the rupee or inflation.
In its Asia Pacific Economic Outlook, S&P flagged rising risks to the global economy due to the turbulence in the West Asia, saying long-lasting major increase in oil prices could have significant economic impact in Asia-Pacific, notably via slower global growth and pressure on the current accounts of net energy importers, prices and costs.
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 per cent of its crude oil and roughly half of its natural gas requirement.
More than 40 per cent of the oil imports and half of gas imports come from the West Asia.
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 per cent 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 per cent.
In the FY25 fiscal, Indian economy grew 6.5 per cent.
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 per cent.
S&P estimates inflation in India to average 4 per cent in 2025, down from 4.6 per cent 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 INR 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.
