Moody’s raises India fiscal 2027 GDP growth forecast to 7% on Middle East resilience

On September 18, credit ratings agency Moody’s upgraded India's forecast for real GDP growth for the current fiscal year to 7%, up from an earlier 6%. The agency cited India's resilience amid the Middle East conflict as the reason behind the increased projection. However, Moody’s warned that risks remain, noting that elevated energy prices and El Niño-related food price pressures could negatively impact inflation, consumption, and growth.

While Moody’s acknowledged that India's fiscal policy response to the Middle East shock had been relatively restrained, the agency cautioned that higher global energy prices could lead to an increase in subsidy spending, potentially putting pressure on the government to provide further support. Additionally, the agency highlighted that rising defense and infrastructure spending might constrain fiscal consolidation efforts.

Recent government data revealed that India's economy expanded by 7.8% in the April-June quarter, significantly surpassing expectations. This robust growth was driven by a surge in investment and manufacturing activity, which helped offset weakness in mining and consumer-facing services sectors.