NEW DELHI, Sept 23: S&P Global Ratings has raised its forecast for India’s real GDP growth in FY27 to 7% from its earlier estimate of 6.6%, citing stronger than expected economic activity in the June quarter. The agency also expects the Reserve Bank of India (RBI) to increase its policy rate by 25 basis points during the fiscal year.
S&P attributed the upward revision to robust industrial activity, resilient consumer spending, strong merchandise exports and higher government investment. These factors helped the economy perform above the agency’s previous expectations in the first quarter of FY27.
However, the agency expects growth to moderate in the second half of the fiscal as the impact of GST rationalisation and income tax reductions gradually diminishes.
The outlook also faces risks from global and domestic factors, including elevated energy prices, tighter US monetary policy and geopolitical tensions. S&P highlighted weather conditions as another concern, noting that cumulative rainfall was 15% below normal through September 9.
According to the agency, agricultural output and food inflation will remain important factors for the economic outlook. Persistent inflationary pressures, higher oil prices and developments in West Asia could also influence monetary policy.
S&P expects consumer inflation to average 5.1% in FY27 and sees the balance of risks shifting towards higher interest rates. It forecasts a 25-basis-point increase in the RBI’s policy rate during the fiscal year.
Higher crude prices could add pressure on both inflation and the Indian rupee. S&P noted that the rupee had weakened by more than 5% against the US dollar through mid-September.
Despite the risks, India continues to record strong domestic consumption and investment activity compared with several other Asia-Pacific economies. S&P’s latest forecast places India’s growth at 7% in 2026, followed by 7.2% in 2027, 7% in 2028 and 6.8% in 2029.
The agency also cautioned that the wider Asia-Pacific region could face risks from a potential slowdown in AI-related investment, elevated energy costs and tighter US monetary conditions.