Global credit rating agency S&P Global raised India's GDP growth forecast for the financial year 2026-27 by 40 basis points to 7.1% on Wednesday, signalling confidence in the country's economic momentum despite global uncertainties.
S&P Global forecast 6.7% for FY27 in its earlier outlook, reported around November–December 2025.
“We project real GDP (gross domestic product) growth to moderate to 7.1% in the fiscal year ending in March 2027, compared with 7.6% in fiscal 2026. Key drivers are resilient private consumption, a modest recovery in private investment, and solid exports,” the agency said in its latest quarterly Asia-Pacific economic commentary.
“But downside risks prevail, primarily due to the renewed geopolitical tensions and persistent trade-related uncertainties. These risks could affect India through fluctuations in commodity prices, trade volumes, and capital flows,” added the agency.
The ratings agency also upgraded its projections for the following years, increasing FY28 growth by 20 basis points to 7.2% and FY29 by 20 basis points to 7.0%, pointing to sustained expansion over the medium term. On the policy front, the Reserve Bank of India is expected to keep interest rates unchanged, maintaining a neutral stance in the base case as it balances growth and inflation dynamics.
Given current energy supply conditions, fuel prices in countries like Japan and India are likely to increase if global oil prices stay high, as governments may scale back subsidies. However, a complete transfer of higher costs to consumers is unlikely. Additionally, ongoing tensions in the Middle East are expected to put pressure on regional economies, particularly those that depend heavily on energy imports from that region.
“Higher energy prices erode purchasing power and depress domestic demand. In countries such as India, Indonesia, Japan, Malaysia, and Thailand, higher prices will force greater spending on subsidies and thereby strain fiscal positions,” it said.
The agency expects inflation in India to rise to 4.3% in fiscal 2027 as it normalises from low levels. “Higher crude prices will likely widen the trade deficit, but a healthy surplus in services trade should help contain the current account deficit. Overall, we expect the central bank to hold rates steady and maintain a neutral stance,” it said while expecting one 25 bps rate hike in the second half.
Talking about the impact of war across the Asia-Pacific region, it said that GDP growth would be 0.3-0.4 percentage points lower in 2026 in China, India, and Japan, and widen to 0.5-0.7 points at the end of the year. In addition to the macroeconomic effects, “the downside energy scenario is also likely to include supply-chain disruption due to shortages of fuel and petroleum-based products,” it said.