S&P Global’s decision to keep India’s FY26 growth forecast at 6.5%-supported by tax cuts, lower interest rates, and strong household demand-positions India as one of the fastest-growing major economies. This has several global spillover effects.

1. Impact on the World Market

a) India becomes a key global demand driver

Slowing growth in Europe and China means global producers are looking to India as the next major consumption market.

• Strong household demand → Increased imports of electronics, luxury goods, machinery, and energy.

• This lifts revenues for global companies exporting to India.

b) More stable global supply chains

Cheaper borrowing costs and tax incentives in India encourage:

• Manufacturing expansion (electronics, autos, pharma)

• Foreign companies increasing “China+1” (usually India, Vietnam, Malaysia) investments

This enhances global supply-chain diversification, reducing the world’s dependency on East Asia.

c) Attraction of foreign investment

A 6.5% growth trajectory makes India one of the most attractive destinations for capital flows.

• More FDI and foreign portfolio inflows

• Strengthens Indian equities’ presence in global indices

• Boosts emerging-market investor confidence

When global investors trust one large emerging economy, risk appetite tends to improve across all EMs.

💱 2. Effect on the USD–INR Exchange Rate

a) Supportive factors for a stronger INR

• Lower RBI rates increase domestic consumption → higher economic activity

• Tax cuts boost corporate earnings → foreign equity inflows

• A strong, stable growth outlook → foreign investors buy Indian debt/equity

All these create demand for INR, offering support around current levels.

b) Why the INR may not strengthen sharply

Export challenges due to US tariffs reduce India’s dollar inflows.

• Higher import demand (due to rising consumption) → increased USD demand

• RBI tends to lean against excessive rupee appreciation to protect export competitiveness

So the impact is:
➡️ INR stays stable or moderately stronger
➡️ Volatility remains due to global USD strength cycles

Net Outcome:
A wide band of ₹88–90 per USD remains likely in the short term.

👥 3. How Indian Consumers Will Influence the Global Economy

India’s consumption story is now globally relevant, similar to China a decade ago.

a) Global companies get a new growth engine

Rising income + cheaper goods due to tax cuts = higher spending on:

• iPhones, electronics

• Automobiles

• Personal luxury (skincare, fashion)

• Travel and hospitality

This creates a new global demand hub when others are slowing.

b) India shapes global price trends

With 1.4 billion people consuming more, India affects:

• Energy prices (oil, LNG)

• Food commodities

• Industrial metals (copper, steel, aluminum)

Higher demand → firmer global prices, especially in energy.

c) Tech and services exports push global costs down

Even with export pressure from the US, India’s services sector stays strong.

• Cheaper outsourcing

• Competitive IT services

• Global back-office operations

This helps lower global operating costs, benefiting world businesses.