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Informist, Wednesday, Sept. 23, 2026

 

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--S&P upgrades India's FY27 real GDP growth forecast by 40 bps to 7%
--S&P:Robust industrial activity, healthy consumption support higher growth
--S&P: Strong exports, accelerating govt investment key growth drivers
--S&P: Expect RBI to raise repo rate by 25 bps to 5.50% in FY27
--S&P: Inflationary pressures, W Asia war, weather risks support rate hike

 

NEW DELHI – S&P Global Ratings Wednesday raised India's GDP growth forecast for 2026-27 (Apr-Mar) by 40 basis points to 7.0%. The rating agency has revised its growth projections upwards considering robust industrial activity, healthy exports, and government support seen during the first quarter of FY27, according to a report. Economists at S&P Global also expect the Reserve Bank of India's rate-setting panel to hike the repo rate by 25 bps to 5.50% in FY27.

 

Last month, S&P Global saw India's growth at 6.6% for the current financial year. The latest growth projection is 30 bps higher than the Reserve Bank of India's projection of 6.7% growth in FY27. Recently, the World Economic Forum estimated the country's growth in FY27 at 6.7% and Moody's projected it at 7.0%. India's GDP grew at 7.8% in FY26.

 

"Several factors drove growth to higher levels than we expected in the June quarter," S&P Global said in the report. "These include robust industrial activity, healthy consumption, strong goods exports, and accelerating government investment."

 

 

That said, economists at S&P see India's growth to ease in the second half of FY27. The growth is likely to moderate because of "tailwinds from General Sales Tax (goods and services tax) rationalisation and income tax cuts diminish," said Louis Kuijs and Vishrut Rana, Asia Pacific economists at S&P in its Economic Outlook Asia-Pacific Q4 2026: Exports, Domestic Demand Will Shore Up Growth report.

 

Over the last two years, the government has simplified and tweaked both the direct and indirect tax structures. The Centre has raised the tax rebate limit to INR 1.2 million and overhauled the tax regime by tweaking the four-slab GST structure of 5%, 12%, 18%, and 28% to a two-slab structure of 5% and 18%.

 

Economists at S&P, at the same time, remains watchful of risks to their growth projections. "Weather-related risks warrant close monitoring," the economists said. According to the India Meteorological Department, India has received 706.9 millimetres of rain during Jun. 1–Sept. 22, which is 15?low the normal of 832.4 millimetres for the period. "Agricultural output and food inflation therefore remain key variables to watch," S&P said.

 

S&P maintained its projection for retail inflation in India at 5.1% in FY27 from 2.0% last year. The higher headline inflation is estimated to weigh on the decision of the RBI's Monetary Policy Committee. "CPI inflation has risen because of higher energy prices, but it is generally manageable...In...India it is within target ranges but moving higher because of energy and food price pressures," S&P said. The RBI aims to maintain inflation in the range of 2-6% and has a medium term target of 4%. For the last three months, India's consumer price index inflation has been above the medium term target. CPI inflation rose to a 20-month high to 4.82% in August from 4.45% in July due to higher food, transport, and restaurant services inflation driven by the impact of the ongoing war in West Asia.

 

On the policy side, the rating agency sees the RBI's Monetary Policy Committee raising repo rate by 25 basis points in FY27 from the current 5.25%. "We expect the balance of considerations to shift toward higher interest rates," Kuijs and Rana said. They see factors such as solid growth and persistent inflationary pressures supporting this shift in the policy. The uncertinities arising due to an unresolved conflict in West Asia and weather-related risks are some other reasons for the rate-setting panel to raise the repo rate this financial year, according to S&P.  End

 

Reported by Shweta

Edited by Akul Nishant Akhoury

 

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