Moody's raises India's FY27 growth forecast to 7% on economic resilience

Moody's Ratings on Wednesday raised its growth forecast for India in the current fiscal year to 7% from 6.5%, citing resilient economic activity and the country's ability to withstand an energy supply shock.

The US-based rating agency, however, warned that rising price pressures, a deficient monsoon and strengthening El Nino conditions could weigh on household consumption and rural demand in the near term.

In its Global Macro Outlook 2027-28, Moody's said robust consumption, improving investment and strong macroeconomic fundamentals put India in a position to sustain growth close to 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%," it said.

The agency flagged inflation as a near-term concern, with headline price growth approaching the upper end of the Reserve Bank of India's 2-6% target range.

A weak southwest monsoon and strengthening El Nino conditions could also hurt agricultural output and rural demand, it said.

Moody's said India could see stronger growth if a sustained private investment cycle boosts manufacturing, employment and productivity.

However, further monetary tightening could delay that recovery.

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

The agency said India had coped with the energy price shock better than previously expected, helped by diversification of crude oil and gas supplies and government measures to shield consumers from immediate price increases.

State-backed oil marketing companies and tax cuts helped cushion the impact, while India's large refining capacity limited fuel supply disruptions and supported exports of refined petroleum products, it said.

Moody's also pointed to signs of a possible revival in private capital expenditure after several years of corporate and banking sector balance sheet repair.