Econ Projections
India Ratings sees India FY27 GDP growth at 6.9%, supported by reforms
This story was originally published at 15:30 IST on 6 January 2026
Register to read our real-time news.Informist, Tuesday, Jan. 6, 2026
NEW DELHI – India Ratings and Research expects the Indian economy to grow 6.9% in 2026-27 (Apr-Mar), lower than the current financial year, for which it projects a GDP growth of 7.4%. For the current fiscal, India Ratings' projection is slightly higher than the Reserve Bank of India's forecast of 7.3%.
Domestic reforms such as goods and services tax rate cuts and signing of three free trade agreements will help the economy withstand global uncertainties caused mainly by the US tariffs, India Ratings said. "Major headwinds include: i) the El Nino pattern from mid-2026, ii) a weak currency due to weak capital flows, iii) sluggish global trade growth, iv) strong growth in FY26 (base effect), and v) slower growth of net production taxes due to GST rationalisation. Another emerging headwind is artificial intelligence", said Devendra Kumar Pant, chief economist at India Ratings.
A faster trade deal between India and the US, and a favourable Indian Ocean Dipole may help minimise the impact of the likely El Nino pattern in mid-2026, pushing GDP growth beyond the current projections, India Ratings said in its economic outlook for FY27. The rating agency said the current economic outlook will be revised once the new GDP and CPI series are released in February.
India's GDP grew 8.2% in the September quarter, much higher than expectations, and brought the Apr-Sept average growth to 8.0%. GDP growth, however, is expected to moderate in the second half of FY26. Economists polled by Informist project FY26 GDP growth at a three-year high of 7.5% in FY26. The statistics ministry will release the first advance estimate of FY26 GDP on Wednesday.
India Ratings expects private final consumption expenditure, which accounts for around 56% of GDP, to grow 7.6% in FY27 against a projected growth of 7.4% in FY26. Consumption demand is likely to be supported by strong services growth, low inflation leading to positive real wage rate, income tax cuts announced in FY26 Budget, and GST rate cuts, India Ratings said.
Gross fixed capital formation is seen rising 7.8% in FY27, against a forecast of 7.4% in FY26, because of sustained government capital expenditure. State government capital expenditure growth has also contributed to public sector capex and is likely to continue in FY27 albeit at a marginally slower pace, the rating agency said.
India's inflation outlook for the rest of FY26 and for FY27 remains benign, it said. India Ratings projects CPI inflation to average 3.8% in FY27, rising from the 2.1% forecast for FY26 but still below the RBI's medium-term target of 4%. WPI inflation is seen rising to 2.3% next year from 0.3% in FY26, the rating agency said. CPI inflation rose to 0.71% in November from a record low of 0.25% in October.
"One of the key reasons for the low retail and wholesale inflation in FY26 has been the deflation in food products both in CPI and WPI. The GST rationalisation in September 2025 made a structural change in prices, and inflation is expected to remain within the RBI's target in FY27. Inflation in 2HFY27 will have an unfavourable base effect," India Ratings said.
With inflation projected to rise and growth seen moderating ahead, the RBI's Monetary Policy Committee has limited scope for further interest rate cuts, it said. The MPC lowered the policy repo rate by 125 basis points in 2025 to 6.25%. India Ratings said interest rates are unlikely to decline by more than 25 bps from the present policy rate and the timing of any rate cut will be data dependent.
India Ratings expects the government's gross and net market borrowings to be INR 16.14 trillion and INR 10.6 trillion, respectively, for FY27. The government has budgeted for a net market borrowing of INR 11.54 trillion for FY26. "The decline in net market borrowings for FY27 is mainly due to higher repayments of INR 5.5 trillion compared to INR 3.28 trillion in FY26 (Budegt Estimate)," the rating agency said.
India Ratings expects the government's debt to GDP ratio to be 56.3% in FY26 against the Budget forecast of 56.1% for the year. In FY27, the debt to GDP ratio is seen falling to 55.5%, the rating agency said. The fiscal deficit for FY27 is estimated at 4.1% against the current year's Budget estimate of 4.4%.
The current account deficit is seen at 1.5% of GDP in FY27 against the forecast of 1.3% of GDP for FY26, India Ratings said. The Indian rupee might average 92.26 against the dollar in FY27. "The agency opines the RBI will intervene in the forex market mainly to manage volatility in the Indian rupee," the report said. End
US$1 = INR 90.17
Reported by Shubham Rana
Edited by Vandana Hingorani
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2026. All rights reserved.
To read more please subscribe
Share this Story:
