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Informist, Friday, Sept. 18, 2026

 

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--Moody's: Don't expect material reduction in India debt over next 2-3 yrs
--Moody's:Debt affordability to be constrained by high global, domestic rates
--Moody's: Revise India FY27 real GDP growth view to 7% from 6?rlier
--Moody's: High energy prices may push annual avg inflation beyond 4.8% view
--Moody's: El Nino-related disruptions could increase food price pressures
--Moody's: Higher energy, fertilizer import cost could widen India CAD
--Moody's:Soft external demand, weak remittance inflows could widen India CAD
--Moody's: Higher energy prices could increase India subsidy outlays
--Moody's: Defense expense, infra invest to limit fiscal consolidation pace
--Moody's: Expect gradual improvement in India's fiscal metrics to continue
--Moody's: Better affordability of debt may put upward pressure on India rtg
--Moody's:Weaker-than-projected growth may put downward pressure on India rtg
--Moody's: Fisc consolidation gains' reversal may put pressure on India rtg
--Moody's: Resurgence of fincl sector stress may put pressure on India rtg
 

 

MUMBAI/NEW DELHI – Moody's Ratings has raised India's GDP growth projection for 2026-27 (Apr-Mar) by 100 basis points to 7.0% as the country has shown "resilience" amid global shock due to the war in West Asia. The rating agency's revised forecast is 30 basis points higher than the Reserve Bank of India's projections for FY27 at 6.7%.

 

"The economy's demonstrated resilience to the global shock wrought by the conflict in the Middle East has driven an upward revision to our forecast," the rating agency said in a press release Friday. Earlier in August, the rating agency had estimated the Indian economy to grow at 6.0% in FY27.

 

Recently, S&P Global Ratings estimated India's growth in FY27 to ease to 6.6% on account of the continuing energy shock and challenging agricultural conditions. India had reported a quicker-than-expected GDP growth at 7.8% in the June quarter because of higher growth in the services and manufacturing sectors. The Indian economy had grown 8.6% in the March quarter, and 6.9% in Apr-Jun of FY26.

 

The rating agency said India has also recorded GDP growth of 8.2% on year in the first six months of 2026. The Indian economy has shown swifter growth in the first half of the calendar year from 7.3% for the full year in 2025, according to the rating agency. The growth is supported by "stronger private consumption, robust gross fixed capital formation that reflects continued public infrastructure spending and a likely revival of private sector investment, and sustained strength in the services sector," Moody's said.

 

The rating agency has maintained its India rating, including its 'Baa3' long-term issuer ratings. Moody's said the ratings "balance its large and diversified economy with high growth potential, a sound external position, and the government's stable domestic financing base against high general government debt, weak debt affordability, and low per capita income."

 

Moody's expects India's debt reduction to remain gradual over the next two to three years, with elevated global and domestic interest rates continuing to constrain debt affordability. Although strong economic growth has facilitated deficit reduction, the rating agency does not expect a material reduction in the country's debt burden over this period.

 

The government's predominantly domestic investor base provides financing flexibility and insulates it from exchange-rate risks, Moody's said. However, debt affordability is likely to remain weaker than that of similarly-rated peers, reflecting India's high debt burden and elevated interest cost structure. 

 

Moody's expects the gradual improvement in India's fiscal metrics to continue over the medium term, supported by strong nominal GDP growth and continued efforts to improve tax administration and revenue collection. The government remains committed to reducing the central fiscal deficit to 4.3% of GDP in FY27 from 4.4% in FY26, it said. 

 

However, higher global energy prices could increase subsidy outlays and raise pressure for additional support measures, while rising defence expenditure and sustained infrastructure investment are likely to constrain the pace of fiscal consolidation, Moody's said. 

 

On the external sector, Moody's said India's increased diversification of crude oil import sources, sizeable foreign exchange reserves, and strong domestic demand provide important buffers. However, higher energy and fertiliser import costs, softer external demand and weaker remittance inflows from the West Asia could widen the current account deficit and weigh on growth momentum. 

 

Moody's said the stable outlook for India incorporates gradually improving fiscal metrics and resilient growth prospects compared with peers. However, fiscal accommodation amid an uncertain global macroeconomic outlook, including revenue-eroding measures, could impede progress towards more material debt reduction and exacerbate already weak debt affordability. 

 

A material improvement in the affordability of India's high debt burden could put upward pressure on the sovereign rating, Moody's said. Such an improvement would likely require fiscal measures that durably raise revenue, narrow the fiscal deficit and contribute to a more marked decline in debt. Effective structural reforms that significantly boost private-sector investment, GDP per capita and economic diversification could also support the credit profile, it said.

 

Conversely, durably weaker-than-projected growth or a reversal of recent fiscal-consolidation gains could put downward pressure on the rating by contributing to materially higher debt and a significant deterioration in debt affordability. A resurgence of financial-sector stress that is not addressed promptly and effectively could also weigh on the rating, Moody's said. 

 

Moody's maintained India's Baa3 long-term issuer ratings in the periodic review. The review, completed on Sept. 10, does not constitute a credit rating action or indicate whether a rating action is likely in the near future.  End

 

Reported by Shweta and Kabir Sharma

Edited by Akul Nishant Akhoury

 

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