UBS raises India’s FY26 GDP growth forecast to 6.4% citing domestic demand amid trade tensions

Swiss brokerage UBS has revised its forecast for India’s FY26 GDP growth to 6.4% from the earlier 6%, citing resilient economic momentum despite ongoing global trade tensions.This revision comes after official data last week showed India’s economy grew by 7.4% in the March quarter, pulling the full-year 2024-25 GDP growth down to 6.5%, compared with 9.2% in FY24.UBS attributed the upgrade to stronger-than-expected domestic demand, expectations of eased tariffs on Chinese imports, potential progress on a US-India trade deal, and support from lower global crude oil prices.“We now raise our forecast of India’s FY26 real GDP growth to 6.4 per cent from 6 per cent. Our higher GDP forecast assumes no significant increase in the effective tariff rate against India and the overall global tariff situation remaining the same,” UBS said in a note.The brokerage’s composite economic indicator shows momentum held firm in April, despite the intensifying trade war environment. It anticipates household consumption to become more broad-based, helped by rural demand recovery — driven by a favourable monsoon and softening food prices — as well as urban consumption supported by tax relief, easing inflation, and potential interest rate cuts.However, UBS sees capital expenditure growth slowing slightly in FY26 due to risks such as China’s potential dumping of excess manufacturing capacity and global uncertainty curbing private investment. It also flagged the possibility of weaker capex from Indian states due to stretched balance sheets.On the external front, goods exports may underperform amid soft global trade, although services exports are likely to stay resilient. The Reserve Bank of India is expected to play a key role in supporting growth, with the brokerage anticipating rate cuts of 50–75 basis points to boost economic activity.