Moody's raises India's FY27 growth forecast to 7%

Moody’s Ratings has raised its forecast for India’s real GDP growth in fiscal 2026-27 to 7% from 6%, citing the economy’s resilience to the shock from the ongoing Middle East conflict and stronger-than-expected domestic activity. The revision comes after the agency had cut its forecast earlier this year amid concerns over the impact of the conflict on energy prices and economic activity.“Although we continue to expect India to grow faster than all other G-20 economies, as well as similarly rated emerging market sovereigns, risks remain,” Moody’s said. The agency’s latest forecast is above the 6.4% projection by the IMF and the 6.6% forecasts from both S&P Global Ratings and the Reserve Bank of India for FY27. Growth holds up despite global shocksMoody’s said stronger private consumption, robust investment, continued public infrastructure spending, signs of a revival in private investment and sustained services-sector strength had supported the economy.India’s real GDP grew 7.8% year-on-year in the April-June quarter, with investment and manufacturing activity helping offset weakness in mining and consumer-facing services.The agency said India’s fiscal policy response to the Middle East shock had been muted and continued to expect a gradual improvement in fiscal metrics over the medium term, supported by strong nominal GDP growth.However, it warned that higher global energy prices could increase subsidy outlays and put pressure on the government to introduce additional support measures. Rising defence expenditure and sustained infrastructure investment could also constrain the pace of fiscal consolidation. Inflation risks remainMoody’s flagged elevated energy prices and possible El Niño-related disruptions as key risks to its outlook. Higher food prices could weigh on private consumption and economic activity, while prolonged energy-market disruptions could push inflation higher.The upgrade follows stronger-than-expected growth data for India. The IMF has also described the economy as resilient despite the energy price shock. IMF spokesperson Julie Kozack said, “India's real GDP in the second quarter grew by 7.8 per cent. That was above our staff's expectations and also the consensus among other observers.” She attributed the surprise to stronger-than-expected activity in services and exports.“The outturn also underscores the resilience of the Indian economy despite the energy price shock. It also means that India does remain a key growth engine for the world,” Kozack added.Get the latest Business News and Live updates. Download the TOI app.