Fitch Ratings Raises India's Potential Growth Forecast to 6.4%

Global rating agency Fitch Ratings has raised India's potential growth forecast to an average of 6.3% over the next five years, highlighting increased labour inputs as a primary factor.

In a report released on May 22, Fitch projected India's economic growth to reach 6.4% in 2025, slightly moderating to 6.3% in 2026, and rebounding again to 6.4% in 2027. This revision marks an increase from the earlier projected rate of 6.2%.

“Our revised estimate implies a stronger contribution from labour inputs (total employment) rather than labour productivity,” the rating agency stated, noting the significant rise in India's labour force participation rate recently. Fitch anticipates this upward trend to continue but at a reduced pace.

This positive revision in India's growth outlook contrasts with Fitch’s more cautious stance on broader emerging markets, whose potential growth is now estimated at 3.9%, down from 4.0% reported in November 2023. According to Fitch's Director, Robert Sierra, this decline mainly reflects reduced potential growth in China, largely impacted by weaker capital investment and declining labour force participation.

The International Monetary Fund (IMF) has similarly revised its forecast for India's growth, predicting a 6.2% increase in FY26 and 6.3% in FY27, slightly down from earlier estimates of 6.5%.

Amid ongoing global economic uncertainties and tariff impacts notably affecting China, India's improved growth trajectory underscores its resilient economic fundamentals and expanding labour market.

Published on 2025/05/27

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