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Informist, Wednesday, Jun. 24, 2026

 

NEW DELHI – S&P Global Ratings has projected India's GDP growth to moderate in 2026-27 (Apr-Mar), as an implication of global energy crisis due to war in West Asia and expectations of a sub-par monsoon. Slowing global growth is also likely to weigh on the Indian economy, S&P said in a report.

 

The rating agency expects India's growth to slow to 6.6% in FY27 from 7.7% in FY26. S&P expects governments in the Asia-Pacific to continue reducing the impact of higher oil prices on fuel product prices. In May, oil marketing companies in India raised petrol and diesel prices by over INR 7 per litre, the first time in the last four years.

 

The Indian economy grew 7.8% in Jan-Mar. Earlier this month, the Reserve Bank of India lowered its growth forecast for FY27 by 30 bps to 6.6%, reflecting the impact of higher energy prices.

 

"The erosion of purchasing power, lower capex investment and negative wealth effects would weigh on growth," S&P economists Louis Kuijs and Vishrut Rana said in the Asia-Pacific economic outlook report. "GDP growth would be 1.0-1.3 ppts (percentage points) lower in China, India and Japan in the third quarter of 2026, with year-average growth 0.5-0.6 ppts higher."

 

The war between the US and Iran, which began almost four months ago, has left a scar on the global energy supply chain. During the war, prices of Brent crude oil reached as high as $122.5 per barrel on Apr. 29. Since the announcement of an interim peace deal between the two countries last week, crude oil has been trading below $80 per barrel.

 

While there is hope on the war front, the previously high energy prices in the current financial year would most likely dent growth and inflation in FY27. S&P estimates India's CPI inflation in FY27 to rise to 5.1% from 2.1% in FY26 as manufacturers pass on higher energy costs to consumers, along with the recent increases in retail prices of petrol, diesel, and cooking gas.

 

The RBI also raised its CPI inflation projection for FY27 by 50 basis points to 5.1%, considering risks from an energy price shock and below-normal monsoon rainfall. 

 

As policymakers try to balance anchoring inflation expectations and mitigating the hit to GDP growth, S&P expects the RBI's Monetary Policy Committee to hike the repo rate by 25 bps in the second half of FY27. In its meeting in June, the Monetary Policy Committee left the repo rate unchanged at 5.25% while flagging rising risks from the energy price shock.

 

In interview to ET Now earlier on Wednesday, RBI Governor Sanjay Malhotra said it was premature to talk about repo rate hikes right now. If the rate-setting panel actually wanted to prepare the market for a rate hike in coming months, it would have changed the policy stance to restrictive from neutral, Malhotra told the news channel.

 

S&P expects the Indian rupee to end FY27 around 93.5 per dollar, higher than the current level of 94.70 a dollar. "Also, with the current account deficit on the rise and the rupee weakening, the authorities took measures to encourage foreign capital inflows," economists at S&P said. "These measures have strengthened the rupee visa-vis the US dollar somewhat."  End

 

US$1 = INR 94.70

 

Reported by Shweta

Edited by Avishek Dutta

 

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