Fitch Ratings has lowered its forecast for India's economic growth in the fiscal year 2027 to 6.4%, reflecting the impact of ongoing geopolitical tensions in West Asia and fluctuating global oil prices. This marks a downward revision from earlier projections by 0.3 percentage points, as the combination of these external shocks weighs on India’s economic momentum.
Despite these challenges, domestic demand continues to underpin growth, with weaker import activity supporting net external demand as a positive contributor to the overall GDP figures. Fitch anticipates that the economy will regain strength next fiscal year, projecting growth to accelerate to 6.7% in FY28 once the Middle East tensions ease and energy price pressures begin to subside. Growth is then expected to settle around a trend rate of 6.4% in FY29.
Fitch emphasizes that although the current oil price shock poses risks to global growth prospects, a surge in global IT spending is helping to cushion the immediate economic impact, particularly across Asian markets. The ratings agency also noted that India’s consumer price inflation has yet to experience significant increases but forecasts it to rise gradually, potentially reaching 5.3% by the end of 2026 due to higher energy costs and base effects. Adverse weather conditions, including forecasted below-average monsoon rains and ongoing heatwaves in some regions, could further intensify inflationary pressures.
Regarding the Indian rupee, Fitch does not foresee substantial depreciation through the remainder of the year. Meanwhile, the Reserve Bank of India (RBI) maintains a slightly higher growth outlook for FY27 at 6.6%, acknowledging downside risks from prolonged supply chain disruptions, financial market volatility, and climate-related shocks. RBI’s quarterly breakdown indicates a slight growth deceleration in the second quarter before pickup in the remaining quarters.