India Ratings projects FY27 GDP growth at 6.8% on risks from West Asia, El Niño

India Ratings and Research (Ind-Ra) on Tuesday projected India's GDP growth to slow to 6.8% in FY27, down from 7.6% in FY26, citing risks from higher fuel and food inflation due to the West Asia conflict, a weak rupee, and the likely impact of El Niño on agriculture. The Fitch Group subsidiary said the FY27 estimate is a tad higher than its May forecast of 6.7%.

The agency expects average crude oil at USD 85 per barrel in FY27, lower than its May estimate of USD 95, and the rupee-dollar exchange rate to average Rs 93.98, a 6.4% year-on-year depreciation. Retail inflation is projected at 4.9% in FY27, compared with 2.1% in FY26, and the current account deficit is estimated to widen to 1.5% of GDP from 0.6%. The fiscal deficit target of 4.3% remains challenging due to subsidies on LPG and fertilisers, Ind-Ra said.

Ind-Ra's quarterly GDP forecasts for FY27 are 6.9%, 6.6%, 6.7%, and 6.9% for the four quarters, respectively, compared with the RBI's projections of 7.0%, 6.4%, 6.5%, and 6.8%. The agency noted that downside risks include geopolitical developments, high inflation, currency depreciation, and weaker-than-expected government capex. Lower oil prices and a weaker El Niño could result in higher growth.