S&P noted that in FY26, despite high tariffs, the Indian economy expanded by 7.7% — more than 100 basis points above analysts’ consensus.
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S&P Global, a global provider of financial information, analytics and ratings and the parent company of the Indian rating agency, Crisil, has praised India’s “remarkable domestic macroeconomic resilience” in the face of increasingly volatile global environment.
In its reported titled India Forward: Reimagining Growth, released today, S&P noted that “unlike other major economies, India has beaten forecasts while contending with the same inflationary pressures, geopolitical conflicts and slower growth.”
It has noted that in 2025-26, despite high tariffs, the Indian economy expanded by 7.7% — more than 100 basis points above analysts’ consensus.
“India’s standout economic outlook does not imply that it is insulated. Its increasing integration into global trade, capital flows and energy mean that external shocks reverberate across its domestic systems. Whether due to disruptions at maritime chokepoints such as the Strait of Hormuz, the reallocation of global portfolio capital toward AI, or the complex balancing of domestic food security and renewable fuel mandates, the boundaries between geopolitical strategy, resource security and economic management are blurring,” S&P said.
Friction points
That said, there are friction points, the research body observes. It points to gathering storm clouds such as inflated crude oil prices because to the war in the Middle East and rainfall being 14% below normal due to El Nino.
Net foreign portfolio inflows fell 16.6 per cent in FY26. Although gross foreign direct investment touched $94.5 billion, net inflows were only $7.8 billion, reflecting outward corporate investment and repatriation.
To sustain annual GDP growth of about 7.8 per cent — the rate estimated to be necessary to achieve the Viksit Bharat goal — India needs to revive private investment and raise total investment above its current 32 per cent of GDP. Semiconductors, electric vehicles and defence are expected to account for 25-27 per cent of industrial investment over the next five years, against 12 per cent in the previous five.
Energy security is another major vulnerability. Indian refiners responded to the effective closure of the Strait of Hormuz, through which more than half of India’s crude imports moved, by turning to Russian supplies and purchases from the Atlantic Basin and Venezuela. The report argues that longer-term resilience will require domestic exploration, including through the $8.8-billion Samudra Manthan initiative.
The energy challenge extends beyond oil. Electricity demand is forecast to grow at 5.56 per cent annually, against 2.47 per cent for total energy demand. Power is expected to account for nearly a quarter of India’s energy mix by 2035. Meeting this demand will require the addition of 300 GW of solar capacity and 95 GW of storage, according to S&P Global Energy.
But adding generation capacity is only part of the task. Transmission constraints stranded more than 6 TWh of solar generation between April and June 2026, while grid inflexibility led to 3,300 GWh of renewable curtailment in early 2026. The report calls for an integrated storage policy spanning grid-scale batteries, pumped hydro and strategic petroleum reserves, linking the management of electricity and fuel security.
The transition also carries supply-chain risks: India must reduce dependence on imported fossil fuels without creating new dependencies on imported clean-technology components. Its ethanol programme, meanwhile, faces pressure from the diversion of maize to fuel production, which is squeezing animal-feed supplies as domestic yields lag global averages.
The report also examines India’s evolving geopolitical strategy, digital rupee, capital markets and competition among States to attract data centres. S&P Global Energy forecasts data-centre capacity rising from 1.5 GW to 26.3 GW by FY32, with Telangana, Maharashtra, Gujarat and Uttar Pradesh well placed to benefit.
Its broad message is that India’s next phase of growth cannot rely on headline GDP numbers or consumption alone. It will depend on addressing physical bottlenecks in energy, agriculture and infrastructure, while mobilising private capital and strengthening domestic capabilities.
Published on October 1, 2026
