India’s Economy Among the Best Performers Globally

India has firmly positioned itself as one of the best performing economies in the world, according to S&P Global. The nation staged a remarkable post-pandemic recovery, with real GDP growth from fiscal 2022 to fiscal 2024 averaging 8.8% — the highest in the Asia-Pacific region.

Robust Growth Outlook for the Medium Term

S&P expects India’s strong growth momentum to continue, projecting GDP to increase 6.8% annually over the next three years. This sustained performance is expected to moderate the government debt-to-GDP ratio, despite persistent fiscal deficits.
The ratings agency further noted that consumer demand and public investment will remain the key growth drivers, with real GDP growth likely to be 6.5% in FY26.

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US Tariff Impact Expected to Be Manageable

While there are concerns over potential US tariffs, S&P believes the impact on India will be limited due to the economy’s domestic-driven nature. Nearly 60% of India’s economic growth comes from domestic consumption, reducing reliance on external trade.

Even if India has to switch from importing Russian crude oil, S&P estimates the fiscal impact will be modest due to the small price difference between Russian crude and global benchmarks.

Limited Exposure to Tariff-Affected Exports

Although the US is India’s largest trading partner, S&P does not foresee the proposed 50% tariffs as a major drag on growth. India’s exports to the US account for around 2% of GDP, and after exemptions for pharmaceuticals and consumer electronics, the tariff-affected share drops to just 1.2% of GDP.

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