India’s growth to slow to 6.8% in FY27 amid West Asia crisis, El Nino risks | Economy & Policy News

India Ratings & Research on Tuesday projected India’s GDP growth to slow down to 6.8 per cent in the current fiscal year, as against 7.6 per cent in the previous year, citing risks from fuel and food inflation stemming from West Asia conflict’s uncertainty, weak currency, and the likely impact of El Nino on agriculture.

The FY27 GDP growth projection at 6.8 per cent is a tad higher than the 6.7 per cent growth Ind-Ra had projected in May.

Earlier this month, the Reserve Bank of India (RBI) had raised growth projections from 6.6 per cent to 6.7 per cent citing resilient domestic economy.

The domestic rating agency said it now estimates average crude oil price at $85/bbl in FY27 compared to $95/bbl in May 2026. It expects rupee-dollar exchange rate to average ₹93.98 (May 2026: ₹94.28), a depreciation of 6.4 per cent YoY, in FY27.

Fitch Group subsidiary Ind-Ra estimates capital flows of $70 billion under foreign currency non-resident (bank) (FCNR B) and external commercial borrowings (ECBs).

The slowdown in GDP growth in FY27 vis-a-vis FY26 is attributed to higher fuel and food inflation stemming from the West Asia conflict’s uncertainty, weak currency, and the likely impact of El Nino on agriculture, Ind-Ra said in a statement.

The agency has forecast quarterly GDP growth at 6.9, 6.6, 6.7, and 6.9 per cent for April-June, July-September, October-December, and January-March as against the RBI’s prediction of 7, 6.4, 6.5, and 6.8, respectively.

Ind-Ra Chief Economist and Head – Public Finance Devendra Pant said crude oil price of the Indian basket averaged $101.31/bbl in the June quarter of FY27 and $96.49/bbl for April-July 2026.

“Our crude oil price assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Nino may limit growth upside from lower oil prices,” Pant said.

Ind-Ra estimates retail inflation to average 4.9 per cent in the current fiscal year, compared to 2 per cent in FY26. Current account deficit is estimated to rise to 1.5 per cent of GDP, from 0.6 per cent in FY26.

The FY27 deficit target of 4.3 per cent remains challenging due to subsidies on liquefied petroleum gas and fertilisers. While direct tax collection and non-tax revenue may support achieving the fiscal deficit target, indirect tax collection may pose challenging, Pant said.