Ind-Ra lifts India’s FY27 economic growth forecast by 10 bps to 6.8% | India News

India Ratings and Research (Ind-Ra) on Tuesday raised its 2026-27 (FY27) real gross domestic product (GDP) growth forecast by 10 basis points to 6.8 per cent from 6.7 per cent estimated in May, citing lower crude oil prices. However, the rating agency warned that an El Niño weather pattern and geopolitical headwinds could weigh on economic momentum, keeping growth below the National Statistical Office’s (NSO’s) provisional estimate of 7.6 per cent for FY26.

 

“The downside risks to GDP growth in FY27 include geopolitical developments, particularly the unresolved West Asia conflict; high headline inflation; a depreciated currency; weak global trade growth; strong GDP growth in FY26 — the base effect; and notably, the likely El Niño weather pattern and the recent US government announcement of levying 100 per cent tariff on India for buying Russian crude,” the agency said in its mid-year economic outlook report.

 
 

Ind-Ra lowered its baseline crude oil price assumption for FY27 to $85 a barrel from its earlier forecast of $95.

 

“The change on the positive side is that oil has drifted below what we initially followed,” said Devendra Kumar Pant, chief economist at Ind-Ra, during a press conference following the release of the report. “For every $10 a barrel drop in oil prices, all else remaining equal, there is a 44 basis point uptick to growth. But monsoon-related aspects have taken away some of that,” he added.

 

The agency sees severe weather risks, particularly El Niño, as the primary constraint on agricultural output and headline consumer prices. “The weak monsoon is already affecting food prices and consumer food price inflation. An adverse base effect would continue to push up food inflation at least until October 2026,” it said.

 

Ind-Ra projects agriculture GVA growth to slow to 2 per cent in FY27 from 3 per cent in FY26.

 

Wholesale price index (WPI) inflation is projected to rise sharply to 8.5 per cent in FY27 from 0.4 per cent in FY26, while consumer price index (CPI) inflation is forecast to average 4.9 per cent. Retail inflation is expected to peak at 5.9 per cent in Q3FY27 before moderating to 5 per cent in Q4FY27.

 

The agency expects the RBI to maintain the status quo on both policy rates and its monetary policy stance for the rest of FY27.

 

Private consumption expenditure, which accounts for more than half of GDP, is expected to grow 7.2 per cent in FY27, slower than 7.7 per cent in FY26. Ind-Ra attributed the moderation to higher inflation, weaker rural incomes due to the impact of El Niño on agriculture and sluggish urban demand.

 

External risks are also expected to remain elevated. The current account deficit (CAD) is projected to widen to 1.5 per cent of GDP in FY27 from 0.6 per cent in FY26.

 

“From an outlook perspective, we want to highlight concerns around the US announcement to levy up to 100 per cent tariffs on India regarding Russian crude purchases,” said Megha Arora, director, Ind-Ra. “While the US Senate has passed the bill and it is yet to become law, it remains a critical risk factor to monitor for India’s trade trajectory,” she added.

 

Gross fixed capital formation (GFCF) is projected to grow 8 per cent in FY27, largely sustained by public sector capital expenditure. Ind-Ra expects the central government to stick to its fiscal deficit target of 4.3 per cent of GDP.