S&P raises India FY27 GDP growth forecast to 7%, sees 25 bps RBI rate hike

S&P Global Ratings has increased its projection for India’s GDP growth in the fiscal year 2027 to 7%, up from the previous estimate of 6.6%. The agency attributes this upward revision to stronger-than-anticipated growth in the second quarter of 2026, driven by robust industrial activity, healthy consumption, strong exports, and increasing government spending.

Despite a challenging global backdrop featuring higher energy prices, tighter U.S. monetary policy, and geopolitical tensions, S&P anticipates India’s growth to further slow in the second half of the fiscal year due to fading benefits from GST rationalization and income tax cuts. Weather-related risks, with actual rainfall 15% below normal as of September 9, are also noted as factors to monitor.

Agricultural performance and food inflation are identified as key variables to watch. Looking ahead, S&P expects the Indian economy to be driven by higher interest rates, supported by solid growth, inflationary pressures, the ongoing conflict in the Middle East, and weather-related risks. Indian consumer prices are projected to average 5.1% for the current fiscal year, with the Reserve Bank of India likely to raise its policy rate by 25 basis points.