India's growth gets further votes of confidence as Moody's raises FY27 forecast to 7% from 6.5%

New Delhi: India's broad-based economic momentum and resilience to the energy supply shock have prompted Moody's Ratings to upgrade the country's economic growth forecast for 2026-27 to 7% from 6.5%. The rating agency attributed potential sustained growth of close to 7% over the medium term to robust consumption, improving investment dynamics and strong macroeconomic fundamentals, even as it cautioned that a possible policy interest rate hike could impact private investment.

Moreover, SBI Research said that India's economy could have grown 7.8% in the July-September quarter, faster than the Reserve Bank of India's (RBI) forecast of 7.2%, citing all leading indicators pointing to this despite global challenges.

In its Global Macro Outlook 2027-28, Moody's Ratings said that near-term risks to growth persist as household consumption remains vulnerable to "intensifying and broadening price pressures", with headline inflation close to the upper end of the RBI's 2-6% target range, while a deficient southwest monsoon and strengthening El Nino conditions will weigh on agricultural output and rural demand. Global growth is likely to slow to 2.6% and stabilise at that level in 2027 and 2028, from 2.8% in 2025, according to the agency. A prolonged energy shock, renewed trade and geopolitical tensions, rising bond yields and weaker returns from investments in artificial intelligence could dampen growth, it said, with emerging markets being particularly exposed, albeit to varying degrees.

With the RBI on track to raise rates further, tighter monetary policy could delay the recovery of private investment in India.

"Central banks in India and South Africa are tightening in response to external pressures from global rate increases," Moody's Ratings said.

The agency noted that India has weathered the energy price shock better than expected by diversifying its crude oil and gas supplies and shielding consumers from the immediate price impact through state-backed oil marketing companies and tax cuts. Further, it said that India's vast, advanced refining sector-which includes the world's largest single-site refining complex-has minimised domestic fuel disruptions while supporting the country's role as a major exporter of refined petroleum. "High frequency indicators, including robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation, suggest that India may be at the cusp of a new private capex cycle after several years of corporate and banking- sector balance sheet repair," Moody's Ratings said.

It highlighted that overall economic activity remains strong, supported by expanding manufacturing and services purchasing managers' indices, alongside double-digit year-on-year increases in goods and services tax revenue, vehicle sales and merchandise exports.

According to the agency, governments increasingly seek to preserve the benefits of trade while protecting domestic productive capacity and economic security, a trend it expects to intensify over the next two years in the US, EU and emerging markets such as India, Brazil and Indonesia.

SBI Research pegs Q2 growth at 7.8%

In a report released on Wednesday, SBI Research forecast GDP growth for July-September at 7.8%, gross value added (GVA) between 8-8.2% with subsidies far outstripping tax collection and nominal GDP growth in the range of 11-11.5%, based on 54 high frequency indicators across agriculture, industry and services. "The percentage of indicators showing acceleration is 88% in Q2 FY27, compared to 78% in Q1 FY26," it said.