Moody’s Hikes India’s GDP Growth Forecast to 7% on Robust Demand

New Delhi: With robust consumption, improving investment dynamics and strong macroeconomic fundamentals in the country, global rating giant Moody’s Ratings on Wednesday said that the Indian economy is expected to grow at 7 per cent in the current fiscal year compared to 6.5 per cent pegged earlier.

Concerned with rising inflation and El Nino conditions, Moody’s also said that near-term risks to growth persist as household consumption remains vulnerable to intensifying and broadening price pressures, with headline inflation close to the upper end of the RBI’s inflation target range, while a deficient monsoon and El Nino conditions weigh on agricultural output and rural demand. Retail inflation rose to 5.54 per cent in September 2026.

“India’s broad-based economic momentum and demonstrated resilience to the energy supply shock warrant upward revisions to our 2026-27 growth forecasts to 7 per cent from 6.5 per cent,” Moody's said in its Global Macro Outlook 2027-28, adding that the robust consumption, improving investment dynamics and strong macroeconomic fundamentals imply that the economy appears well positioned to sustain growth in the country.

However, RBI estimates GDP growth of 7.1 per cent in the current fiscal, in line with OECD projection. The International Monetary Fund (IMF), ADB and S&P Global Ratings have projected a 7 per cent growth, while Fitch Ratings expects India's GDP to grow 6.9 per cent.

India has adjusted to the energy price shock better than previously assumed with its ability to diversify crude and gas supplies and buffer consumers from the immediate price impact through state-backed oil marketing companies and tax cuts. “India is also home to the world's largest single-site refining complex, and its large and sophisticated refining capacity has helped limit fuel supply disruptions while supporting its role as a major exporter of refined petroleum products,” it said.

“High frequency indicators, including robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation, suggest that India may be at the cusp of a new private capex cycle after several years of corporate and banking- sector balance sheet repair,” the US-based rating giant said.

Moody’s further said that broader economic activity also remains solid amid expanding manufacturing and services purchasing manager indexes and double-digit year-on-year growth in goods and services tax revenue, vehicle sales and merchandise exports. “With the RBI on track to raise rates further, tighter monetary policy could delay the recovery in private investment,” it added.