Strong consumption, industrial activity, exports and government investment lift the growth outlook, but higher oil prices, food inflation and a weak monsoon pose risks
S&P Global has raised its forecast for India’s economic growth in FY2026-27 to 7 per cent from 6.6 per cent, citing stronger-than-expected activity in the first half of the financial year.
The upgrade comes amid robust economic momentum, with industrial activity, consumption, goods exports and government investment providing support to growth.
The agency, however, expects the pace of expansion to moderate in the second half of FY27 as the impact of GST rationalisation and income tax cuts fades. The S&P Global upgrade comes a day after stronger-than-expected growth estimates from other major rating agencies.
Fitch Ratings raised its FY27 growth forecast to 6.9 per cent from 6.4 per cent, saying private investment is likely to remain an important driver of the economy. Similarly, the Asian Development Bank (ADB) raised India’s growth forecast to 7 per cent, up from 6.6 per cent projected earlier. The forecast revision was driven by robust growth witnessed in Q1 of FY27 at 7.8 per cent.
S&P Global flagged weather conditions as a key risk to India’s growth outlook. Cumulative rainfall was 15 per cent below normal through September 9, raising concerns over agricultural output and the potential impact on food prices. The agency said higher oil prices could push inflation higher, while El Niño conditions could add to food-price pressures.
S&P Global expects preparedness measures to help prevent an acute supply crunch and limit the broader impact on the economy. However, it also expects some monetary policy tightening as higher energy prices add to inflationary pressures. Inflation remains within India’s target range, but the agency said price pressures are building due to higher energy and food costs. S&P Global expects 25-basis-point rate increases in India and several other Asia-Pacific economies during the remainder of 2026.
More from BusinessHigher US interest rates could put additional pressure on Asian currencies and increase the risk of capital outflows, according to S&P Global. India, Indonesia, the Philippines and Thailand had each seen their currencies depreciate by more than 5 per cent through mid-September, the agency said.
The combination of elevated crude oil prices, higher inflation, currency weakness and tighter global financial conditions could weigh on the regional economic outlook.
Fitch Ratings separately raised its FY2026-27 GDP growth forecast to 6.9 per cent from 6.4 per cent. Fitch said India’s economy expanded 8.6 per cent year-on-year in the first quarter of calendar 2026, before growth slowed to 7.8 per cent in the second quarter while still exceeding its earlier expectations. The agency expects growth to moderate over the rest of FY27 because of slower manufacturing and services growth, below-normal monsoon rainfall and rising inflation.
At the same time, Fitch expects investment to grow by more than 10 per cent, with non-food credit growth reaching 19 per cent year-on-year in July. Fitch has forecast India’s GDP growth at 6.5 per cent for FY2027-28, while warning that inflation and monetary policy will remain key factors shaping the outlook.
