New Delhi (Economy India): S&P Global Ratings has raised its forecast for India’s real GDP growth in FY2026-27 to 7 per cent from 6.6 per cent, citing stronger-than-expected economic activity and resilient domestic demand.
The ratings agency also expects the Reserve Bank of India (RBI) to raise its policy rate by 25 basis points during FY27, as inflationary pressures remain a consideration for monetary policy.
In its latest economic assessment for the Asia-Pacific region, S&P estimated that India’s consumer inflation will average 5.1 per cent in FY27.
India GDP Growth Beats Expectations
The revised growth forecast follows stronger-than-expected economic performance in the first quarter of FY27.
India’s economy expanded by 7.8 per cent year-on-year in the April-June quarter, exceeding expectations and providing a stronger starting point for the fiscal year’s growth outlook.
S&P attributed the stronger momentum to several factors, including robust industrial activity, healthy consumption, strong goods exports and accelerating government investment.
The combination of domestic demand and investment activity has helped support economic expansion despite an uncertain global environment.
Industrial Activity and Consumption Support Growth
Industrial activity has remained an important contributor to India’s economic momentum, while consumption has provided support from the demand side.
Strong consumption indicates continued domestic demand, while government investment has added to overall economic activity through infrastructure and other capital expenditure.
S&P also highlighted the contribution from goods exports, suggesting that external demand has provided an additional source of support to growth.
Inflation Remains a Key Policy Consideration
While the growth outlook has improved, inflation remains an important factor in the monetary-policy outlook.
S&P expects India’s consumer inflation to average 5.1 per cent in FY27. The projection comes amid global uncertainties, including movements in energy prices and broader inflationary pressures.
Higher inflation can affect household purchasing power and influence the RBI’s decisions on interest rates.
S&P Expects 25 bps RBI Rate Hike
S&P expects the RBI to increase its policy rate by 25 basis points during FY27.
The forecast comes against a backdrop of changing global monetary conditions. Major central banks have been adjusting policy in response to inflation, energy prices and economic activity.
The RBI’s future decisions will depend on incoming inflation and growth data as well as developments in financial markets and the global economy.
Global Risks Remain in Focus
Despite the upward revision to India’s growth outlook, external risks remain relevant.
S&P Global’s broader September outlook has highlighted renewed pressure from higher energy prices, tighter monetary policy in major economies and rising sovereign yields. The agency said the global economic environment remains resilient but risks have increased.
For India, movements in crude oil prices are particularly important because the country is a major energy importer. A sustained rise in oil prices can put pressure on inflation, the current account and the rupee.
India’s Growth Outlook
The latest S&P forecast places India’s FY27 growth estimate at 7 per cent, following the stronger-than-expected April-June performance.
The revision also comes after other major institutions adjusted their India growth projections. Moody’s, for instance, raised its FY27 growth forecast to 7 per cent on September 18, citing India’s resilience, while also flagging risks from higher global energy prices and El Niño-related food inflation.
With domestic consumption, industrial activity, exports and government investment supporting growth, the trajectory of inflation and global energy prices will remain important variables for India’s economic outlook.
Key Economic Indicators
| Indicator | S&P Global Forecast / Data |
|---|---|
| FY27 GDP Growth Forecast | 7.0% |
| Previous S&P Forecast | 6.6% |
| April-June GDP Growth | 7.8% |
| FY27 Average Consumer Inflation | 5.1% |
| Expected RBI Rate Increase in FY27 | 25 basis points |
| Key Growth Drivers | Industry, consumption, goods exports, government investment |
What to Watch Next
The outlook for India’s economy will depend on the durability of domestic demand, industrial production, government investment and export performance.
At the same time, inflation, crude oil prices, currency movements and global monetary policy will remain key factors for the RBI and financial markets.
S&P’s latest forecast therefore combines a higher growth projection with an expectation of some monetary-policy tightening during FY27, reflecting the balance between strong economic activity and inflation risks.
(Economy India)
