S&P Global commends India’s robust growth, surpassing forecasts amid global turbulence, yet highlights looming challenges in energy demand and investment revival that could impact future prospects.
S&P Global has struck an upbeat note on India’s economy, describing the country as unusually resilient even as global conditions remain unsettled. In its latest study, “India Forward: Reimagining Growth”, the ratings group said India had outpaced expectations despite inflation, geopolitical tension and a slower international economy, helped by a large domestic market that continues to buffer external shocks.
The report said the economy expanded by 7.7% in 2025-26, more than a full percentage point above consensus forecasts, even with elevated tariffs and a difficult external backdrop. S&P Global also said India’s growth path is not immune to events abroad, warning that tighter links with global trade, capital flows and energy markets mean shocks can quickly feed through to the domestic economy. A separate S&P Global study in the same India Forward series said the country remained the world’s fastest-growing major economy, with projected growth of 6.5% in fiscal 2026.
Beneath the strong headline numbers, the report flagged several warning signs. It pointed to higher crude prices linked to Middle East conflict, weaker rainfall associated with El Niño and a 16.6% fall in net foreign portfolio inflows in FY26. Although gross foreign direct investment reached $94.5bn, net inflows were only $7.8bn, reflecting outward investment by Indian companies and profit repatriation. S&P Global said these pressures could weigh on industrial output and wider growth if they persist.
The group argued that sustaining annual GDP growth of roughly 7.8% would require a revival in private investment and a larger overall investment rate, above the current 32% of GDP. It said sectors such as semiconductors, electric vehicles and defence may account for 25%-27% of industrial investment over the next five years, up from 12% previously. At the same time, the report warned that India must continue to broaden its energy options, including by building strategic petroleum reserves, diversifying imports and accelerating domestic exploration through the $8.8bn Samudra Manthan initiative.
Energy demand is emerging as one of the clearest stress points. S&P Global Energy expects electricity demand to rise faster than total energy consumption and says power could make up nearly a quarter of India’s energy mix by 2035. Meeting that need would require an additional 300GW of solar capacity and 95GW of storage, while also tackling transmission bottlenecks and renewable curtailment. The report said India must avoid replacing dependence on imported fossil fuels with new dependence on imported clean-tech components, and it highlighted data centres, digital payments and state-level competition for investment as part of the next phase of growth.
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