Global ratings agencies raise India growth projection to 7%

Global ratings agencies S&P, Fitch, the Asian Development Bank (ADB) and the Organisation for Economic Cooperation and Development (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 of India (RBI) to hike policy interest rates by at least 25 basis points this year while raising India's GDP growth forecast for this year to 7 per cent, from 6.6 per cent previously. Paris-based OECD raised GDP growth forecast for India by 80 basis points to 7.1 per cent — the highest growth rate so far projected by any international agency for FY27.

ADB, while raising the growth forecast to 7 per cent, from 6.6 per cent 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 West Asia.

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 per cent, from 6.4 per cent earlier. The growth upgrades by these four global agencies came close on the heels of US-based Moody's Ratings last week, raising the GDP growth forecast for the fiscal year to 7 per cent — the fastest among all G20 economies.

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

But slower expansion in both manufacturing and services, along with below-normal monsoon rains, is likely to moderate growth over the rest 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.

The 7.8 per cent 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.

“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 per cent 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.

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.