ICRA on Monday said it estimates India's Gross Domestic Product (GDP) growth to moderate to 6.5% in 2026-27, from 7.6% in the current fiscal year owing to the adverse impact of elevated energy prices and concerns around energy availability amid the West Asia conflict.
The growth projections assume average crude oil price at $85/bbl in 2026-27 fiscal year. It expects India's current account deficit (CAD) to widen sharply to 1.7% of GDP in fiscal 2027 (from 1% in current fiscal).
ICRA said the upside risks to inflation stemming from the ongoing global energy supply disruptions amid the West Asia conflict could feed into inflationary expectations of households. This, along with heightened uncertainty is likely to sour consumer sentiments in the near term.
While trends in high frequency indicators for January-February 2026 appear favourable, the heightened uncertainty around the duration of the West Asia conflict casts a shadow on the near-term macroeconomic outlook for countries like India amid high import dependency for items such as crude oil, natural gas and fertilisers.
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If the conflict lasts for an extended period, the adverse implications of the same could widen across sectors, amid an uptick in input costs and the consequent impact on profitability of India Inc, ICRA said.
"India's GDP growth is expected to moderate to 6.5% in fiscal 2027 from the projected 7.5% in fiscal 2026, owing to the adverse impact of elevated energy prices and concerns around energy availability, even as developments around tariffs, lower GST rates, policy rate cuts, subdued food inflation, and upbeat farm sector trends augur well for consumption," ICRA added.
Amid the projected uptrend in the CPI inflation in fiscal 2027 (with risks tilted to the upside), ICRA expects an extended pause on the policy rates by the Monetary Policy Committee (MPC) through the fiscal, despite the anticipated softening in the GDP growth. However, the RBI may continue to intervene on the liquidity front during fiscal 2027, it said.
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