Moody’s Ratings has raised India’s economic growth forecast for FY27 to 7% from 6.5%, citing broad-based economic momentum and the country’s resilience to the energy supply shock. However, higher inflation, a deficient monsoon and strengthening El Niño conditions remain key risks.
New Delhi, November 11 — Moody’s Ratings has upgraded India’s economic growth forecast for the current fiscal year to 7% from its earlier estimate of 6.5%, supported by strong economic momentum and better-than-expected resilience to the global energy supply shock.
In its Global Macro Outlook 2027-28, the US-based rating agency said robust consumption, improving investment dynamics and strong macroeconomic fundamentals indicate that India is well positioned to sustain growth close to 7% over the medium term.
Private investment could push growth higher
Moody’s said a sustained boom in private investment that significantly boosts manufacturing, employment and productivity could take India’s growth above its baseline projections.
Several high-frequency indicators are already pointing towards improving investment activity.
According to Moody’s, strong capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation suggest that India could be at the beginning of a new private capital expenditure cycle.
This follows several years of balance-sheet repair in the corporate and banking sectors.
Manufacturing and services purchasing managers’ indexes also continue to indicate solid economic activity.
The agency additionally highlighted double-digit year-on-year growth in GST revenue, vehicle sales and merchandise exports.
Inflation remains a key risk
Despite the stronger growth outlook, Moody’s warned that risks remain in the near term.
Household consumption could come under pressure from intensifying and broadening price pressures, with headline inflation close to the upper end of the Reserve Bank of India’s 2-6% tolerance range.
A deficient southwest monsoon and strengthening El Niño conditions could also weigh on agricultural production and rural demand.
Monetary policy could present another challenge. Moody’s said that with the RBI expected to raise interest rates further, tighter monetary conditions could delay the recovery in private investment.
India handles energy shock better than expected
India’s ability to deal with the energy price shock was another major reason behind Moody’s growth upgrade.
The country has been able to diversify its crude oil and natural gas supplies, while state-backed oil marketing companies and tax reductions have helped shield consumers from the immediate impact of higher energy prices.
Moody’s also highlighted India’s large and sophisticated oil refining industry.
The country is home to the world’s largest single-site refining complex, while its overall refining capacity has helped limit fuel supply disruptions and strengthened India’s position as a major exporter of refined petroleum products.
With consumption remaining robust and investment indicators strengthening, Moody’s expects India’s economy to maintain growth of around 7%, although inflation, monetary tightening and weather-related risks will remain important factors to watch.
