New Delhi | India's GDP growth rate will rise to 7 per cent by 2026 compared to 4.6 per cent for China, S&P Global Ratings said on Tuesday.

In a report titled 'China Slows India Grows', S&P said it expects Asia-Pacific's growth engine to shift from China to South and Southeast Asia.

We project China's GDP growth to slow to 4.6 per cent in 2024 (2023: 5.4 per cent), edge up to 4.8 per cent in 2025, and return to 4.6 per cent in 2026. We see India reaching 7.0 per cent in 2026; Vietnam, 6.8 per cent (4.9 per cent); Philippines, 6.4 per cent (5.4 per cent); and Indonesia remaining steady at 5 per cent, S&P said.

The US-based rating agency on Monday projected India's GDP to expand at 6.4 per cent in the current fiscal year and in the next. For 2025 it projected growth rate to rise to 6.9 per cent, followed by 7 per cent in 2026.

S&P said with Asia-Pacific's central banks likely to keep interest rates high, the region's borrowers will see costlier debt servicing.

Concurrently, a widening conflict in the Middle East could drag global supply chains and raise energy costs, fanning inflation. High input costs dilute corporate margins, while high prices weaken demand, S&P said.

Energy and demand shock risk, it said, adding Asia-Pacific's growth is susceptible to energy shocks (widening Middle East conflict) and slower global demand (risk of U.S. hard landing).

We lowered our projection for the region's growth (ex-China) in 2024 from 4.4 per cent to 4.2 per cent. The prospects for industries also differ, with export-centric manufacturing faring worse, S&P said.