Credit ratings agency Moody’s raised India’s FY27 real GDP growth forecast to 7% from 6%, according to PTI. The Credit ratings agency cited India’s resilience amid the Middle East conflict, however, flagged crude and El-Nino risk.
“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 according to PTI.
Moody’s also said India’s fiscal policy response to the Middle East shock had been muted, but warned that higher global energy prices could increase subsidy spending and pressure the government to provide additional support, while rising defence and infrastructure spending could constrain fiscal consolidation.
Energy prices, El Niño pose risks to growth
On risks, Moody’s flagged energy prices and El Nino-related disruptions that could increase food price pressures, which may weigh on private consumption and overall economic activity.
‘Looking ahead, in the absence of an enduring resolution to the conflict in the Middle East, elevated energy prices could push annual average inflation beyond our projection of 4.8% for FY27, which is already significantly higher than the 2.4% outturn in fiscal 2025-26, while El Nino-related disruptions could increase food price pressures, weighing on private consumption and economic activity,’ it added.
Moody’s also warns of widening current account deficit (CAD). The agency said, while the increased diversification of India’s crude import sources, sizeable foreign exchange reserves and strong domestic demand provide important buffers, higher energy and fertilizer import costs, softer external demand and weaker remittance inflows from the Middle East could widen the current account deficit and weigh on growth momentum more broadly.
In Q1FY27 (April-June quarter), India’s economy grew 7.8%. According to Moody’s India’s real GDP growth accelerated to 8.2% year on year in the first six months of calendar year (CY) 2026, up from 7.3% for the full year in CY 2025, supported by stronger private consumption, robust gross fixed capital formation that reflects continued public infrastructure spending and a likely revival of private sector investment, and sustained strength in the services sector.