India's GDP growth likely to slow to 6.6% in FY27 on weaker consumption, investment, and West Asia shocks: BMI

India's economy is expected to grow at 6.6% in FY26-27, slowing from 7.7% in FY25-26, as weaker consumption and investment growth, along with trade-related disruptions stemming from the West Asia crisis, weigh on economic activity, BMI, a Fitch Group company, said. 

The forecast is in line with the Reserve Bank of India's (RBI’s) projection of 6.6% growth for FY27. 

According to government data released last week, India's GDP growth accelerated to 7.7% in FY25-26 from 7.1% in FY24-25, supported by healthy consumption demand and robust investment activity. 

BMI also expects the rupee to trade at around 95.1 against the US dollar during the current calendar year. The research firm said the currency's depreciation from an average level of 87 in 2025 would improve export competitiveness and help offset some of the economic impact arising from the Iran conflict and related terms-of-trade shocks. 

The report noted that GST reforms implemented in September 2025 triggered a consumption boom during the December quarter of FY26. However, the momentum eased thereafter, with consumption growth slowing by 1.1 percentage points to 7.1% year-on-year in the March quarter. 

"Looking ahead, we continue to expect 6.6% GDP growth in FY26/27. Our projection represents a visible slowdown from FY25-26's 7.7% pace but exceeds India's average 6.1% per annum growth rate over the last decade," BMI said. 

The firm attributed the expected moderation in growth to three key factors. First, the positive impact of last year's GST reforms on domestic consumption is likely to fade. Second, higher inflation, projected at 5.3% in FY27, could curb consumer spending, particularly if disruptions around the Strait of Hormuz push up energy prices. 

BMI also expects investment growth to moderate during the fiscal year. However, it said the slowdown is not primarily linked to its forecast of a cumulative 50-basis-point increase in RBI policy rates during FY26-27, as the impact of tighter monetary policy would largely be felt in FY27-28. 

At the same time, BMI noted that the current low level of short-term interest rates, following the RBI's cumulative 125-basis-point rate cuts in 2025, would continue to provide support to economic activity during the ongoing energy crisis.