ADB raises India FY27 growth forecast to 7%, cuts FY28 estimate to 7.1%

Fitch has increased its growth forecast for India's fiscal year 2027 to 6.9%, up from 6.4% previously. The ratings agency attributes this change to stronger-than-expected expansion in the June quarter and the economy's resilience in the face of external shocks. However, Fitch forecasts that growth momentum may slow later in the year as below-normal monsoon rains, high inflation, and signs of weakening manufacturing and services activity hurt growth. The Reserve Bank of India is expected to raise its policy rate by 25 basis points in October.

India's economy expanded 7.8% in the June quarter, demonstrating resilience despite the economic fallout from the US-Iran war. This 7.8% growth rate suggests the Indian economy has withstood the shock from the conflict, even as the strong terms-of-trade deterioration in the first half of 2026 was experienced. PMI surveys indicate slower manufacturing and services expansion, while weaker monsoon rainfall will impact agriculture and rural demand.

Higher inflation may also squeeze real household incomes and consumption. However, investment is expected to remain a robust driver of growth, with private investment prospects looking more promising. Fitch projects investment to increase by more than 10% and non-food credit growth reaching 19% year-over-year in July.

Fitch now expects GDP to grow 6.9% during the current fiscal year, a 50-basis-point upgrade from its June forecast of 6.4%. The combination of resilient demand, rising prices, and supply-side pressures is likely to shape the RBI's monetary policy trajectory. Fitch anticipates the RBI will raise rates by 25 basis points to 5.5% in October, followed by a further increase to 5.75% in early 2027.

Rates are then expected to ease back to 5.5% in 2028. This outlook comes as other major ratings agencies have also projected stronger growth for India.