Domestic rating agency Crisil on Wednesday raised its FY27 GDP growth forecast for India to 7% from 6.6%, citing expectations of strong economic growth in the first half of the fiscal year.
The upgrade added to a broader shift in expectations for India, with the Asian Development Bank, S&P Global Ratings and Moody’s Ratings also putting the country’s growth outlook at around 7%. Resilient consumers, investment and government spending helped cushion the economy from a volatile global backdrop.
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But the same outlook carried a warning: a strengthening El Nino, coupled with elevated energy prices, could have triggered a fresh inflation shock for an economy where food prices had an outsized influence on household budgets. That could have left the Reserve Bank of India with less room to ease monetary policy even as growth remained strong.
Strong first half, slower second half
Crisil Chief Economist D K Joshi said the agency expected the economy to grow faster in the first half of FY27 before losing momentum in the second half. The view followed 7.8% GDP growth in the first quarter.
“The economy is doing strong. We expect the first half to witness fast growth, while the growth will slow down in the second half,” Joshi told reporters in Mumbai, according to a PTI report.
The agency assumed crude oil prices would average $87-93 a barrel in FY27, compared with $70 a barrel in FY26, while making its growth projections, the report said.
Monsoon performance was another key variable. Joshi said the monsoon was 12% below the long-term average and could affect the winter crop. He added that reservoir levels and soil moisture would be important for the rabi crop, with weaker farm output potentially affecting economic growth.
The weather risk also featured prominently in the ADB’s outlook. The multilateral lender warned that a strong El Nino combined with elevated energy prices could have created a dual supply shock for developing Asia by reducing agricultural yields, constraining hydropower generation and adding to price pressures.
Growth had domestic support
Earlier this month, the ADB’s upgrade to a 7% growth forecast reflected a broad-based domestic recovery, with private consumption remaining firm, gross fixed capital formation holding up and public infrastructure spending accelerating.
Services activity and a revival in private capital expenditure also supported momentum, helping India remain the fastest-growing major economy in the region.
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S&P Global Ratings similarly raised its FY27 growth forecast to 7% from 6.6%, citing stronger-than-expected June-quarter growth, robust industrial activity, healthy consumption, goods exports and accelerating government investment.
Moody’s Ratings also raised its FY27 growth forecast to 7% from 6%, while Fitch Ratings expected growth of 6.9%, up from its earlier 6.4% forecast. The World Economic Forum expected 6.7% growth, while Jefferies saw a 6.5-7% range.
Inflation and oil remained risks
For now, domestic demand provided a buffer against weaker global demand and geopolitical disruptions. But a poor monsoon could have simultaneously hit farm output, rural incomes and food prices.
India’s monsoon was 15% below the long-term average, raising concerns over Kharif crops such as rice, sugarcane and corn. A weaker harvest could have added to food-price pressures and squeezed household budgets, while lower hydropower generation could have compounded the energy shock.
The ADB expected India’s retail inflation to average 5.2% in 2026, leaving policymakers with less room to absorb another surge in food and energy prices.
S&P also expected the RBI to raise its policy rate by 25 basis points during the fiscal year as persistent inflation, weather risks and the West Asia conflict added to price pressures.
Crisil, meanwhile, expected two 25-basis-point rate hikes by the RBI in October and December. Joshi said the hikes were unlikely to hurt private capital investment because companies were sitting on large cash balances and had deleveraged balance sheets.
Rupee was seen strengthening
On the currency front, Joshi said the rupee was undervalued and could appreciate to 93.5 against the US dollar by March 2027.
Previous episodes of currency depreciation had also shown that the rupee strengthened after coming under pressure, he said.
Joshi also said the RBI would continue using various tools to manage excess liquidity in the financial system.
Growth also depended on jobs and skills
Beyond the near-term growth numbers, Crisil saw skilling as an important part of making the growth process stronger.
Joshi said artificial intelligence could automate some work but could also create new jobs, as previous technological revolutions had done.
The latest forecasts therefore presented a two-sided picture: India’s domestic economy provided a strong base for growth, but the next phase depended on how well the country managed pressures from weather, energy prices, inflation and monetary policy.
