S&P noted that in FY26, despite high rates, India’s economy grew by 7.7% – more than 100 basis points above analyst consensus. | Photo Credit: Lemon_tm
S&P Global, a global provider of financial information, analytics and ratings and the parent company of India’s rating agency, Crisil, has praised the “remarkable domestic macroeconomic resilience” in the face of an increasingly volatile global environment.
In the report entitled India Continues: Reimagining Growth, rreleased today, S&P noted that “unlike other major economies, India has beaten forecasts while grappling with similar inflationary pressures, geopolitical conflicts and slower growth.”
It has noted that in 2025-26, despite high rates, India’s economy will grow by 7.7% – more than 100 basis points above analyst consensus.
“India’s exceptional economic outlook does not indicate that it is isolated. Increasing integration into global trade, capital and energy flows means that external shocks are shaking the domestic system. Whether it is due to disruptions at maritime points such as the Strait of Hormuz, the reallocation of global portfolio capital to AI, or the balance of domestic renewable and complex and renewable fuels. Strategy, resource security and economic management are blurred,” said S&P.
Friction point
That said, there is a point of friction, the research body observes. It refers to gathering storm clouds such as rising crude oil prices due to the war in the Middle East and 14% below normal rainfall due to El Nino.
Net foreign portfolio inflows fell by 16.6 percent in FY26. Although gross foreign direct investment reached $94.5 billion, net inflows were only $7.8 billion, reflecting the company’s outward investment and repatriation.
To sustain the annual GDP growth of about 7.8 percent – the estimated level necessary to achieve the goal of Viksit Bharat – India needs to revive private investment and raise the total investment in 32 percent of the current GDP. Semiconductors, electric vehicles and defense are expected to account for 25-27 percent of industry investment over the next five years, against 12 percent in the past five years.
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 oil imports pass, by diverting supplies and buying Russia from the Atlantic Basin and Venezuela. The report says long-term sustainability requires domestic exploration, including through the $8.8 billion Samudra Manthan initiative.
The energy challenge goes beyond oil. Electricity demand is forecast to grow 5.56 percent annually, against 2.47 percent for total energy. Power is expected to account for nearly a quarter of India’s energy mix in 2035. Meeting this demand will require an additional 300 GW of solar capacity and 95 GW of storage, according to S&P Global Energy.
But increasing generation capacity is only part of the task. The transmission limitation resulted in more than 6 TWh of solar generation between April and June 2026, while network inflexibility resulted in 3,300 GWh of renewable curtailment in early 2026. The report calls for an integrated storage policy that includes grid-scale batteries, hydro pumps and strategic petroleum reserves, and fuel security.
The transition also brings supply chain risks: India needs to reduce its dependence on imported fossil fuels without creating new dependence on imported clean technology components. The ethanol program, meanwhile, is facing pressure from the diversion of corn to fuel production, which is straining animal feed supplies as domestic yields lag the global average.
The report also examines India’s emerging geopolitical strategy, the digital rupee, capital markets and competition among countries to attract data centers. S&P Global Energy forecasts data center capacity to grow from 1.5 GW to 26.3 GW by FY32, with Telangana, Maharashtra, Gujarat and Uttar Pradesh benefiting.
The broad message is that India’s next phase of growth cannot rely on GDP or consumption numbers alone. It will depend on overcoming physical bottlenecks in energy, agriculture and infrastructure, while mobilizing private capital and strengthening domestic capabilities.
Published on October 1, 2026