Moody's raises India FY27 GDP growth forecast to 7% on W Asia resilience

Moody's has increased India's real GDP growth forecast for the current fiscal year to 7%, from the previously estimated 6%. The agency's assessment is based on India's resilience in the face of global turbulence, particularly the Middle East conflict. Despite elevated energy prices and food price pressures, Moody's sees India growing faster than all other G-20 economies and similarly rated emerging market economies.

India's economy has proven to be more resilient than anticipated, absorbing shocks better than expected. Brent crude oil remains above $100 a barrel, and geopolitical tensions continue to pose risks to inflation, consumption, and growth. However, India's GDP expanded 7.8% in the April-June quarter of FY27, surpassing both the Reserve Bank of India's 7% forecast and the 7.1% median estimate in a Reuters poll.

The country's strong performance is evident across various sectors. Private consumption grew by 7.1%, gross fixed capital formation increased by 11.9%, and manufacturing expanded by 9.2%. Investment, including both private and corporate capital expenditure, has also shown notable growth, with gross fixed capital formation rising to 34.3% of GDP from 31.4% a year earlier. Private-sector capital investment increased by over Rs 5 trillion, and corporate capital expenditure rose by 11%.

Domestic demand has played a crucial role in absorbing the shocks, as India's large domestic market acts as a buffer against external weaknesses. Consumption has continued to grow, even as oil prices rise and geopolitical uncertainty increases. This resilience is further bolstered by strong public infrastructure expenditure and growing private investment in sectors such as data centers, manufacturing, and power.

Despite the ongoing challenges, India appears poised to continue its faster-than-expected growth trajectory, as it has demonstrated the ability to absorb external shocks and maintain strong domestic demand.