S&P, Fitch, Others Raise FY'27 India GDP Growth Projections; See RBI Rate Hike On Inflation Fears

Global agencies S&P, Fitch, Asian Development Bank (ADB) and OECD on Wednesday raised India's FY27 GDP growth projection to around 7 per cent, boosted by robust June quarter economic activity and resilient domestic demand despite conflict in West Asia.

Additionally, S&P and Fitch said inflationary pressures will push the Reserve Bank to hike policy interest rates by at least 25 basis points in the current year.

Paris-based Organisation for Economic Cooperation and Development (OECD) upped GDP growth forecast by 80 basis points to 7.1% -- the highest growth rate so far projected by any international agency for FY'27.

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ADB, while raising the growth forecast to 7%, from 6.6% estimated in July, said the Indian economy has benefited from lower-than-expected supply disruptions and sustained capital inflows, which helped cushion the impact of the conflict in the Middle East.

S&P upgraded India's GDP growth forecast for the current fiscal year to 7%, from 6.6% previously, while Fitch Ratings said growth in India remains "very strong" with "very robust" dynamism despite the oil price shock, hiking GDP growth estimates to 6.9%, from 6.4% earlier.

The growth upgrades by these four global agencies came close on the heels of US-based Moody's Ratings last week raising GDP growth forecast for the fiscal year to 7% -- the fastest among all G20 economies.

Here is a synopsis of what the four agencies projected for Indian economy:

S&P Global Ratings

S&P hiked India's GDP growth forecast for the current fiscal year to 7%, from 6.6% previously, citing robust economic activity and forecast that the RBI could hike interest rates by 25 basis points in FY27.

The Indian economy grew higher than expected at 7.8% in the June quarter, driven by robust industrial activity, healthy consumption, strong goods exports, and accelerating government investment.

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But a slower pace of expansion in both manufacturing and services and below-normal monsoon rains is likely to moderate growth over the remaining part of the fiscal year ending March 31, 2027.

Growth is expected to ease in the second half of the fiscal year as the tailwinds from Goods and Services Tax (GST) rationalisation and income tax cuts diminish, it added.

"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. We expect consumer inflation to average 5.1 per cent and the Reserve Bank of India to raise its policy rate by 25 bps in the current fiscal year," S&P said.

Fitch Ratings

Fitch Ratings raised India's GDP growth forecast for the fiscal to 6.9%, from 6.4%, citing strong economic growth in the June quarter and overall economic resilience.

The 7.8% growth rate in the June quarter indicates that the Indian economy has shown resilience in the face of the shock from the US-Iran war, despite the strong terms-of-trade deterioration seen in the first half of 2026, Fitch said.

India's economic momentum is likely to moderate over the remaining fiscal year, prompting the Reserve Bank of India (RBI) to increase interest rates by 0.25% in its October monetary policy meeting, Fitch said, adding inflation to touch 5.5% in December this year.

"World growth is holding up well in the face of the energy price shock, but real interest rates are rising," Fitch said in its World Economic Outlook, while raising its global GDP growth forecast by 20 bps to 2.6%.

OECD

The Paris-based body raised India's GDP growth projection for current fiscal by 80 basis points to 7.1% citing resilient domestic demand and government policies that cushioned households and firms from the impact of higher energy prices.

"Despite recent strong momentum, reduced purchasing power is also expected to weaken growth in India through the second half of this year, before a gradual recovery takes place in 2027. In annual terms, growth is projected to fall from 7.8 per cent in fiscal year (FY) 2025-26 to 7.1 per cent in FY 2026-27 and 6.5 per cent in FY 2027-28," OECD said.

OECD's GDP growth projection of 7.1% for FY27 is the highest among other international agencies.

"Amongst the emerging-market economies, India is projected to raise policy rates temporarily to help offset stronger inflationary pressures," said the OECD Economic Outlook Interim report.

It said global economic prospects remain "heavily dependent" on whether a durable resolution to the Middle East conflict is achieved. At the current juncture, countries will have to undertake structural policy reforms that enhance their ability to cope with supply-side disruptions, it added.

ADB

The Manila-based ADB raised its forecast for India's FY'27 growth to 7%, up from 6.6% projected in July, citing stronger-than-expected economic performance in the June quarter despite supply-side disruptions caused by the West Asia crisis.

Growth is supported by robust investment demand, resilient consumption, and solid growth in manufacturing and service sectors.

The economy has also benefited from lower-than-expected supply disruptions, sustained capital inflows, and limited pass-through of higher input costs to consumer prices, which helped cushion the impact of the conflict in the Middle East, the Asian Development Outlook report said.

ADB Country Director for India Mio Oka said that despite supply disruptions and high commodity prices, India's economy continues to demonstrate resilience, supported by strong infrastructure spending and growth-supporting fiscal and monetary policies.

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