Moody's raises India's FY27 real GDP growth forecast to 7% from 6%, credits fiscal policies

Moody's has raised India's real GDP growth forecast for financial year 2026-27 to 7% from the previous 6%.

The American rating giant, in its periodic review issued on Friday, September 18 elevated India's real GDP growth projection to 7% from 6% for the current fiscal year.

Moody's attributed this upgrade to the South Asian nation's demonstrated resilience in the face of West Asia-oriented geopolitical tensions.

What Did Moody's Say

The agency did issue a caveat, as Moody's anticipates India will continue to expand at a rate exceeding all other G-20 member economies, as well as other sovereigns with comparable ratings; considerable risks persist.

Moody's identified elevated global energy prices and El Niño-induced agricultural price pressures as significant threats to inflationary trends, consumer spending patterns, and overall economic expansion in an agriculture- and monsoon-dependent economy.

The agency noted that India's fiscal policy adjustments in response to the West Asia disruption have remained restrained. However, it cautioned that sustained elevated global energy prices could necessitate increased subsidy expenditures and compel the government to implement supplementary assistance measures.

Additionally, expanding defence and infrastructure investments may impede progress toward fiscal consolidation objectives.

According to official government statistics released last month, India's economy expanded by 7.8% during the April-June quarter. These projections have garnered much attention from different corners as they surpassed all estimates.

Market And Rupee

As per Moody's, this robust performance was driven by a substantial increase in capital investment and manufacturing sector growth, which effectively counterbalanced declines in mining operations and consumer-oriented service industries.

Meanwhile, looking at the equity markets in India, the marquee Nifty 50 index has lost close to 11% of its value since the beginning of the year. Furthermore, the Indian Rupee, trading at around 96 against the US dollar, has slumped over 6% in the same period after having started 2026 below 90, at 89.96.

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