Moody’s said stronger private consumption, investment, infrastructure spending and services activity have helped India withstand external shocks, but energy prices and El Nino remain risks
Moody’s Ratings has raised its forecast for India’s real GDP growth in 2026-27 to 7 per cent from 6 per cent, saying the economy has been more resilient to the West Asia conflict than it had expected.
The ratings agency said stronger private consumption, robust investment, continued public infrastructure spending and strong services activity were supporting growth.
It also expects private-sector investment to pick up, adding to growth in the current fiscal.
“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.
Strong GDP growth supports outlook
The upgrade comes after stronger-than-expected economic data.
India’s real GDP grew 7.8 per cent in the April-June quarter of FY27. The growth was supported by investment and manufacturing activity, even as mining and some consumer-facing services remained weak.
India’s economy grew 7.7 per cent in FY26, according to the latest official estimates. Private final consumption and gross fixed capital formation both grew more than 7.5 per cent during the year.
Moody’s said the strong domestic economy has helped India absorb the impact of the West Asia conflict, which has disrupted energy markets and increased concerns over inflation and trade.
More from BusinessConsumption and investment remain key drivers
Private consumption is becoming an important support for growth.
Moody’s said household demand has strengthened, while gross fixed capital formation has remained strong. Public spending on infrastructure has also continued to support economic activity.
The agency expects private investment to revive further. Strong services activity is another support for growth.
These factors have helped offset some of the pressure from the external environment.
Moody’s forecast above IMF, RBI and S&P
Moody’s new 7 per cent forecast is higher than recent projections from other major institutions.
The International Monetary Fund put India’s FY27 growth forecast at 6.4 per cent in its July 2026 update. It said higher energy prices were weighing on its outlook, although private consumption and services remained strong.
S&P Global Ratings expects India’s FY27 growth at 6.6 per cent. It said the continuing West Asia conflict, higher energy prices and disruptions to energy supplies could slow growth.
The Reserve Bank of India has also projected 6.6 per cent growth for FY27.
Oil prices and El Nino remain risks
Moody’s said the better growth outlook does not remove the risks facing the economy.
Higher energy prices could push up inflation and hurt consumption and growth. India is highly dependent on imported crude oil, so a prolonged rise in global energy prices could increase costs for households and businesses.
The agency also warned that El Nino-related food price pressures could raise inflation.
Higher energy and food prices could reduce household purchasing power and weaken consumer demand.
Fiscal consolidation may remain gradual
Moody’s said India’s fiscal policy response to the West Asia shock has so far been muted.
However, a prolonged rise in global energy prices could increase subsidy spending and create pressure for more government support.
Higher defence spending and continued infrastructure investment could also make fiscal consolidation slower.
The Union Budget for FY27 targets a fiscal deficit of 4.3 per cent of GDP, compared with 4.4 per cent in FY26.
Moody’s expects India’s debt burden to decline gradually. It also flagged weak debt affordability compared with similarly rated sovereigns.
India’s rating outlook remains stable
The latest review does not change India’s sovereign credit rating. Moody’s retained India’s Baa3 rating with a stable outlook.
The agency said India’s credit profile is supported by its large and diversified economy, high growth potential, external position and stable domestic financing base.
These strengths are balanced by high government debt, weak debt affordability and low per capita income.
