India's economic growth to slow to 6.8% in FY27 amid West Asia crisis, El Nino impact: Re

India Ratings and Research (Ind-Ra) on Tuesday projected India's economic growth to moderate to 6.8% in the current financial year, down from 7.6% in FY26, citing risks from higher food and fuel inflation, currency weakness and the potential impact of El Nino on agriculture.

The agency's FY27 growth forecast is marginally higher than its earlier estimate of 6.7% made in May 2026.

The projection also comes after the Reserve Bank of India raised its FY27 GDP growth forecast earlier this month to 6.7% from 6.6%, citing the resilience of the domestic economy.


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Ind-Ra said uncertainty surrounding the West Asia conflict could put upward pressure on fuel and food prices, while a weaker rupee and the possible impact of El Nino on agricultural output could weigh on economic activity.

The agency expects the Indian basket crude oil price to average USD 85 per barrel in FY27, lower than its previous assumption of USD 95 per barrel made in May. It has also projected the rupee to average Rs 93.98 to the US dollar during the fiscal year, compared with its earlier forecast of Rs 94.28. This would represent a 6.4% year-on-year depreciation.

Ind-Ra, a Fitch Group company, expects capital flows of USD 70 billion through foreign currency non-resident bank deposits (FCNR-B) and external commercial borrowings (ECBs).

Growth outlook

Ind-Ra has projected GDP growth of 6.9% in the April-June quarter, 6.6% in July-September, 6.7% in October-December and 6.9% in January-March.

The corresponding quarterly growth estimates from the RBI are 7%, 6.4%, 6.5% and 6.8%, respectively.

Ind-Ra Chief Economist and Head of Public Finance Devendra Pant said crude oil prices had remained elevated in the early part of FY27.

"The crude oil price of the Indian basket averaged USD 101.31/bbl in the June quarter of FY27 and USD 96.49/bbl for April-July 2026."

"Our crude oil price assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Nino may limit growth upside from lower oil prices," Pant said.

Inflation, current account risks

Ind-Ra expects retail inflation to average 4.9% in FY27, sharply higher than the 2% recorded in FY26.

The agency has also projected India's current account deficit to widen to 1.5% of GDP in FY27 from 0.6% in the previous fiscal year.

On the fiscal front, Ind-Ra said meeting the government's FY27 fiscal deficit target of 4.3% of GDP could prove difficult, particularly because of subsidies for liquefied petroleum gas and fertilisers.

While stronger direct tax collections and non-tax revenue could help the government meet its fiscal target, weaker-than-expected indirect tax collections could pose a challenge, Pant said.

With inputs from agencies