New Delhi: Moody’s Ratings has raised its forecast for India’s economic growth in the 2026-27 financial year to 7%, up from its earlier estimate of 6%, citing the economy’s resilience to global disruptions and strong domestic demand.
In its latest review of India’s Baa3 sovereign rating, the agency highlighted improvements in economic activity but warned that rising energy prices and potential weather-related disruptions could increase inflationary pressures.
India’s real GDP growth reached 8.2% year-on-year during the first six months of calendar year 2026, compared with 7.3% for the full year in 2025. The expansion was supported by stronger private consumption, continued public infrastructure investment, improving prospects for private-sector spending and sustained growth in services.
Moody’s expects India to record faster growth than other G20 economies and similarly rated emerging markets. However, it cautioned that prolonged conflict in the Middle East could push average inflation above its 4.8% projection for the current fiscal year. Inflation stood at 2.4% in 2025-26.
The agency also identified El Niño-related disruptions as a potential threat to food prices, household spending and overall economic activity.
India’s diversified crude oil import sources, substantial foreign exchange reserves and strong domestic demand provide protection against external shocks. Nevertheless, higher energy and fertiliser costs, weaker overseas demand and reduced remittances from the Middle East could widen the current account deficit and affect growth.
Fiscal Challenges Remain
Moody’s said the government’s fiscal response to the Middle East crisis has remained limited, reflecting its commitment to reducing the central government deficit from 4.4% of GDP in 2025-26 to 4.3% in 2026-27.
The agency retained India’s stable rating outlook, citing resilient growth and gradual improvements in fiscal indicators. However, it warned that measures reducing government revenue or increased fiscal support could slow debt reduction and worsen debt affordability.
India’s economy expanded 7.8% in the June quarter of FY27, exceeding the Reserve Bank of India’s 7% growth estimate.
