Ind-Ra projects India's economic growth to slow down to 6.7% in FY27

Amid ongoing uncertainty over West Asia crisis, India Ratings & Research (Ind-Ra) has projected India's economic growth to slow down to 6.7% in the current fiscal year (FY27) on decelerated demand and supply. The agency believes higher fuel and food prices due to the West Asia conflict's uncertainty and the likely impact of evolving El Nino on agriculture from mid-2026 will pull down GDP growth in FY27. Besides, Indian economy is estimated to have grown 7.6% in FY26. It also said that retail inflation is likely to stay within the Reserve Bank of India’s (RBI's) tolerance band at 4.4% despite recent fuel price hikes. Ind-Ra's projections are lower when compares to 6.9% GDP growth and 4.6% inflation projection by the RBI.

Ind-Ra Director - Economics Megha Arora said ‘Major headwinds include geopolitical developments, particularly the West Asia conflict, high headline inflation, a depreciated currency from weak capital inflows, weaker-than-expected capex especially by the government to reduce fiscal risks, weak global trade growth, strong FY26 growth (base effect), low industrial production as measured by the Index of Industrial Production (IIP), and notably, the likely El Nino weather pattern from mid-2026’.

The agency has assumed average oil prices at $95/bbl in FY27 and expects the government, oil marketing companies and consumers to share the burden of high global oil prices with consumers sharing the least burden. It estimates that a $10/bbl increase in crude oil prices could reduce GDP growth by 44 bps, while a 10% reduction in capex could lower GDP growth to 6%.

It expects the government to announce easy access to credit and measures like credit guarantees as opposed to direct cash transfers to shield people and small industries from the impact of the West Asia crisis. For the April-June quarter of the current fiscal year, Ind-Ra estimates GDP growth at 6.7% and said the El Nino impact is likely to be felt more in July-September quarter, as against the June quarter. Ind-Ra estimates rupee-dollar exchange rate to average ₹94.28, a depreciation of 6.7% year-on-year in FY27. The Indian rupee touched a record low of 96.47 to a dollar on May 19, 2026.