India’s GDP Growth to Surpass 6.5% in 2025-26: Moody’s

Global rating agency Moody’s has forecasted that India’s GDP growth will exceed 6.5% in the 2025-26 fiscal year, driven by higher government capital expenditure, increased consumer spending fueled by tax cuts, and lower interest rates.

For the current financial year (2024-25), Moody’s had earlier projected GDP growth at 6.3%. While India’s economic expansion slowed to 5.6% in Q2 of 2024-25 (July-September), it rebounded to 6.2% in the December quarter, indicating a strong recovery.

Stable Outlook for India's Banking Sector

Moody’s also maintained a stable outlook on India's banking sector, citing an improving operating environment for banks. The agency noted that while the quality of bank loan assets has significantly improved in recent years, there could be moderate risks ahead, particularly in the unsecured loans and microfinance segments.

Despite potential challenges, banks are expected to remain profitable, as the impact of rate cuts on net interest margins will be minimal. Loan growth is projected to remain strong at 11-13% in 2025-26.

Inflation & RBI’s Policy Approach

Moody’s anticipates that average inflation will ease to 4.5% in 2025-26, providing relief to consumers. The report also acknowledged the Reserve Bank of India’s (RBI) recent repo rate cut in February, suggesting that further rate cuts will likely be moderate due to global economic uncertainties, particularly U.S. trade policies.

With India’s economy regaining momentum, the country remains one of the fastest-growing economies in the world, reinforcing its position as a key driver of global growth.