Moody’s raises India’s FY27 growth forecast to 7% on broad-based economic momentum

Moody’s Ratings on Wednesday raised its forecast for India’s economic growth in the current fiscal year to 7% from 6.5%, citing broad-based economic momentum and the country’s demonstrated resilience to energy supply shocks.

In its Global Macro Outlook 2027-28, the ratings agency said robust consumption, improving investment dynamics, and strong macroeconomic fundamentals have positioned India to sustain growth of around 7% over the medium term. “India's broad-based economic momentum and demonstrated resilience to the energy supply shock warrant upward revisions to our 2026-27 growth forecasts to 7% from 6.5%,” Moody’s said.

The agency, however, flagged near-term risks to growth, particularly as household consumption remains vulnerable to intensifying and broadening price pressures. Headline inflation is close to the upper end of the Reserve Bank of India’s (RBI) 2-6% target range while a deficient southwest monsoon and strengthening El Niño conditions could weigh on agricultural output and rural demand.

Private capex cycle gathers momentum

Moody’s said a sustained private investment boom that mainly boosts manufacturing, employment, and productivity may lift India’s growth above its baseline projections.

High-frequency indicators point to a strengthening investment cycle, it said, citing robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation. “India may be at the cusp of a new private capex cycle after several years of corporate and banking-sector balance sheet repair,” the US-based ratings agency said.

However, it cautioned that tighter monetary policy could pose a risk to the investment recovery. “With the RBI on track to raise rates further, tighter monetary policy could delay the recovery in private investment,” Moody’s said.

Energy shock resilience supports outlook

India has adjusted to the energy price shock better than previously anticipated, helped by its ability to diversify crude oil and gas supplies and shield consumers from the immediate impact of higher prices through state-backed oil marketing companies and tax cuts, Moody’s said.

The agency also highlighted India’s large and sophisticated refining capacity, which has helped limit fuel supply disruptions while strengthening the country’s position as a major exporter of refined petroleum products.

India is home to the world’s largest single-site refining complex, Moody’s noted. Broader economic activity remains solid, supported by expanding manufacturing and services purchasing managers’ indexes. The agency also pointed to double-digit year-on-year growth in goods and services tax collections, vehicle sales and merchandise exports.

While near-term risks from inflation, weather conditions and tighter monetary policy remain, Moody’s said India’s strong macroeconomic fundamentals and broad-based growth momentum provide a solid foundation for the economy to sustain growth close to 7% over the medium term.