S&P Global Ratings has raised its forecast for India’s real GDP growth in the fiscal year ending March 31, 2027, to 7 per cent from 6.6 per cent earlier, citing stronger-than-expected growth in the June quarter. The ratings agency also expects the Reserve Bank of India to raise its policy rate by 25 basis points during the fiscal year.
S&P attributed the upgrade to robust industrial activity, healthy consumption, strong goods exports and accelerating government investment, which together pushed growth above earlier expectations. The revision comes despite a challenging external environment marked by elevated energy prices, tighter US monetary policy and geopolitical risks weighing on the broader Asia-Pacific outlook.
The agency expects India’s growth to ease in the second half of the fiscal year as the boost from GST rationalisation and income tax cuts fades. It also flagged weather-related risks, noting that cumulative monsoon rainfall was 15 per cent below normal through September 9, which could affect agricultural output and food inflation in the months ahead.
On interest rates, S&P said the balance of considerations is shifting toward higher rates, citing solid growth, persistent inflationary pressures, the unresolved conflict in West Asia and weather-related risks. It expects consumer inflation to average 5.1 per cent this fiscal year and forecasts a 25 basis point rate hike by the RBI, as rising oil prices add further pressure on inflation and the rupee. The agency noted that most Asia-Pacific currencies have weakened against the US dollar this year, with the Indian rupee down more than 5 per cent through mid-September.
Despite these risks, S&P said India remains one of the stronger growth engines in the region, with particularly strong consumption growth and investment momentum among the highest across Asia-Pacific economies.
The upgrade adds to a series of bullish assessments of India’s growth prospects. Jefferies recently projected real GDP growth of 6.5 to 7 per cent for the current fiscal year, while the World Economic Forum raised its FY27 growth forecast to 6.7 per cent in August, citing resilient domestic demand. Moody’s Ratings also raised its FY27 forecast for India to 7 per cent from 6 per cent on September 18, citing stronger private consumption and continued infrastructure spending.
S&P cautioned, however, that the broader Asia-Pacific outlook remains exposed to a potential slowdown in AI-related investment, along with persistently high energy prices and tighter US monetary policy.
(Source: The Economic Times)
