Fitch raises India FY27 GDP growth forecast to 6.9% from 6.4%, sees 25 bps RBI rate hike in October

Fitch Ratings has raised India’s growth forecast for the current fiscal year to 6.9% from 6.4%, citing stronger-than-expected expansion in the June quarter and the economy’s resilience despite external shocks.

The ratings agency, however, expects momentum to moderate during the rest of the fiscal year as below-normal monsoon rainfall, elevated inflation and signs of slowing manufacturing and services activity weigh on growth. Fitch also expects the Reserve Bank of India (RBI) to raise its policy rate by 25 basis points in October.

Also Read: S&P Global Ratings raises India FY27 growth aim to 7% from 6.6%, estimates 25 bps RBI rate hike


India’s economy expanded 7.8% in the June quarter, which Fitch said demonstrated its ability to withstand the economic fallout from the US-Iran war.

A growth rate of 7.8% 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.

PMI surveys point to slower expansion in manufacturing and services, while weaker monsoon rainfall is expected to affect agriculture and rural demand. Higher inflation could also squeeze real household incomes and consumption.

Investment, however, is expected to remain a stronger pillar of growth.A

Also Read: Decoding GDP growth: The good, the bad & the data

"Private investment prospects look more buoyant, and we expect investment to rise by more than 10 per cent; non-food credit growth reached 19 per cent yoy in July," Fitch added.

Fitch now expects GDP to expand 6.9% during the current fiscal year, a 50-basis-point upgrade from its 6.4% forecast in June.

The combination of resilient demand, rising prices and supply-side pressures is also expected to shape the RBI’s monetary policy trajectory.

"Given the combination of strong demand, price rises, and adverse supply developments, we expect the RBI to raise rates by 25 bp in October this year to 5.5 per cent. We then expect a further rise to 5.75 per cent in early 2027 and then for rates to ease back to 5.5 per cent in 2028," Fitch said.

The upgrade comes as other major ratings agencies have also projected stronger growth for India. Earlier on Wednesday, S&P Global Ratings projected India’s FY27 GDP growth at 7%, the same rate forecast by Moody’s Ratings last week.

The Indian economy expanded 7.8% in the previous fiscal year, 2025-26.