S&P raises India's FY27 growth forecast to 7%, sees 25 bps RBI rate hike

S&P Global Ratings has raised its forecast for India's economic growth in the fiscal year ending March 2027 to 7% from 6.6% earlier, citing robust industrial activity, healthy consumption, strong goods exports and accelerating government investment.

In its latest Asia-Pacific economic outlook, S&P said growth in India was stronger than expected in the June quarter, prompting the upward revision.

"We have consequently upgraded our GDP growth forecast for the current fiscal year, ending March 31, 2027, to 7.0%, from 6.6% previously," it said.

However, the agency expects growth to moderate in the second half of the fiscal year as the boost from Goods and Services Tax (GST) rationalisation and income tax cuts fades.

It also flagged weather-related risks, noting that cumulative rainfall was 15% below normal till September 9 during the current monsoon season.

"Agricultural output and food inflation therefore remain key variables to watch," S&P said.

Last week, another global rating agency, Moody's too, had raised India's GDP growth forecast for the fiscal to 7%, the fastest growth rate among all G20 economies.

The Indian economy grew at 7.8% in the previous fiscal (2025-26).

S&P expects India's retail inflation to average 5.1% and sees the Reserve Bank of India (RBI) raising its policy rate by 25 basis points during the current fiscal year.

"We expect the balance of considerations to shift toward higher interest rates," it said, citing solid growth, persistent inflationary pressures, the unresolved conflict in West Asia and weather-related risks.

The agency said inflation in India remained within the central bank's target range but was moving higher because of energy and food price pressures.

The agency raised its 2026 growth forecast for the Asia-Pacific region to 4.6% from its previous estimate by 0.2 percentage points and expects growth of 4.4% in 2027.

It said strong exports and resilient domestic demand were supporting growth across the region, while AI-related investment was providing a boost to Asian technology exports.

The agency also noted that global growth had held up despite elevated energy prices and tighter monetary policy, with AI-related investment, particularly in the US, supporting Asian technology exports.