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Indian economy’s FY27 growth prospects on Wednesday received an upward revision from two global institutions and two rating agencies.
The Asian Development Bank (ADB), the Organisation for Economic Co-operation and Development (OECD) and rating agencies Fitch Ratings and S&P Global Ratings raised their current financial year growth projections for India to 6.9-7.1 per cent, citing economic resilience amid the West Asia conflict, backed by investment momentum, healthy consumption demand and strong industrial activity.
They also forecast an increase in the RBI’s policy rate later this year.
Fitch raised its India gross domestic product (GDP) growth forecast to 6.9 per cent on Wednesday from 6.4 per cent made in June, while ADB and S&P Global raised theirs to 7 per cent from the 6.6 per cent forecast in June. OECD raised its GDP projection to 7.1 per cent from 6.3 per cent forecast in June.
Last week, Moody’s Ratings had also raised its GDP growth projection for India to 7 per cent for 2026-27 (FY27).
The revisions come after the Indian economy grew faster than expected at 7.8 per cent in April-June, despite geopolitical headwinds from the West Asia crisis.
The growth forecasts of all five global agencies are now above the Reserve Bank of India’s (RBI’s) projection of 6.7 per cent for FY27.
Economists said revisions to GDP growth projections by these institutions were expected as the print for the June quarter was better than expected.
“The upward revision by these institutions and agencies is in line with expectations on account of the pleasant surprises in the economy: the performance of the trade sector and inflation largely remaining under control so far although oil prices have surpassed $100 per barrel mark several times,” Madras School of Economics Director N.R. Bhanumurthy said.
India’s goods exports have maintained momentum with double-digit growth in each of the last five months of the financial year. In April-August, India’s merchandise exports were $216 billion, up nearly 18 per cent higher Year-on-Year.
“Trade diversification has taken place despite the supply chain disruption and geopolitical uncertainty,” Bhanumurthy said.
Although at a 20-month high of 4.82 per cent in August, India’s retail inflation has remained close to the RBI’s target. However, India’s wholesale inflation has hovered very close to 10 per cent in the last four months since May. High wholesale inflation typically translates to retail prices with a lag.
Therefore, the agencies expect that inflationary pressures may prompt the RBI to raise the repo rate. S&P Global expects a 25-basis-point increase during FY27, while Fitch sees a 25-bps hike in October itself. ADB expects a “modest rate hike” during the financial year, without specifying its quantum.
OECD too, without specifying quantum, said India may raise the repo rate temporarily to help offset stronger inflationary pressures.
ADB has lowered its growth projection for FY28 to 7.1 per cent from 7.3 per cent earlier, citing increased global economic uncertainty.
“Private investment growth may moderate (in FY28) due to global economic uncertainty but is expected to remain strong in select sectors such as data centers and energy, where the investment pipeline is still robust,” ADB said in its September update of the Asian Development Outlook.
The multilateral agency has lowered its headline inflation forecast for India to 5 per cent from 5.2 per cent earlier citing the limited pass-through of higher energy prices to consumers. It retained its FY28 forecast for inflation at 4 per cent.
Core inflation will rise in the second half of FY27 as the impact of Goods & Services Tax (GST) rate cuts wanes and input cost pressures eventually pass through to retail prices, ADB said. Food inflation is also expected to rise from its low FY26 base, driven by reduced supply of pulses, oilseeds, fruits and vegetables due to an unfavourable monsoon, though relatively strong grain buffer stocks are expected to cap the increase.
ADB expects the MPC to announce a modest repo rate hike in FY27.
The forecast assumes that the monetary policy stance will remain neutral, the development bank said. However, as consumer inflation remains above the 4 per cent monetary policy target, a modest rate hike later in FY27 is likely “if commodity price inflation spills over into the consumer price index,” it said.
Risks to the outlook include a flare-up in the West Asia conflict, which could push up global oil prices, and weather-related risks to crop production from the El Nino effect, ADB said.
Fitch expects India’s GDP to expand 6.5 per cent in both FY28 and FY29, their first projection for the next two years.
“We expect GDP to rise by 6.5 per cent, with consumer spending and investment driving growth. External demand will hold up, with net exports contributing positively to growth (albeit to a lesser extent than in the current financial year),” Fitch said in its September update of the Global Economic Outlook.
Fitch expects retail inflation to rise to 5.5 per cent by December this year before easing to 4.2 per cent by end-2027 and 4 per cent by end-2028.
Given the combination of strong demand, price pressures and adverse supply developments, Fitch expects the RBI to raise the repo rate by 25 bps in October to 5.5 per cent and a further rise to 5.75 per cent in early 2027 before easing back to 5.5 per cent in 2028.
Although S&P Global raised its FY27 GDP growth forecast, it expects the pace of expansion to ease in the second half of the year as the boost from last year’s GST rate rationalisation and income tax cuts diminishes.
The agency expects consumer inflation to average around 5.1 per cent in FY27, which it said could prompt the RBI to raise the repo rate by 25 bps.
“We expect the balance of considerations to shift toward higher interest rates. Factors supporting this shift include solid growth, persistent inflationary pressures, an unresolved conflict in West Asia, and weather-related risks,” S&P Global said in its report, Economic Outlook Asia-Pacific Q4 2026.
OECD expects reduced purchasing power to weaken growth in India through the second half of this year, before a gradual recovery takes place in 2027, as per its interim Economic Outlook.
It has raised India’s growth projection for FY28 to 6.5 per cent from 6.4 per cent previously.
The agency trimmed its retail inflation estimate for FY27 to 4.7 per cent from 4.8 per cent projected earlier, but raised the inflation view for FY29 to 4.2 per cent from 4.0 per cent.
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