Why Global Credit Agencies Are Suddenly Raising India's GDP Growth Outlook

India's economic growth has shown unexpected strength, prompting S&P Global to raise its forecast for the fiscal year 2027. Official figures revealed a 7.8% rise in real GDP in the first quarter of FY27, outpacing expectations. This performance has prompted other analysts to revise their growth projections upward. Several key factors have contributed to the positive outlook, including robust industrial production, increased domestic consumer spending, a rise in merchandise exports, and higher public capital expenditure.

Despite this optimism, S&P anticipates a modest deceleration in economic momentum during the latter half of FY27. The benefits of recent tax reforms and GST rationalization might gradually diminish, lessening support for household spending and commercial operations. Climate-related risks, particularly weather conditions, continue to pose a significant threat.

India's current monsoon season has been 15% below average as of September 9, 2026, with cumulative rainfall severely impacting agricultural production and potentially fueling food inflation.

Emerging market economies across the Asia-Pacific region have demonstrated resilient growth, averaging 5.2% annually in the second quarter. S&P expects the broader Asia-Pacific economy to expand by 4.6% in 2026, an increase of 0.2 percentage points from previous estimates. This growth is anticipated to steady at 4.4% in 2027, driven by technology exports and accommodative monetary policies.

China's growth trajectory is projected to remain subdued, with real GDP expected to expand by 4.3% in both 2026 and 2027. However, challenges such as weak consumption, constrained investment, declining property activity, and wavering consumer confidence could exacerbate economic vulnerability. S&P warns that external shocks or policy disruptions could precipitate a sharper downturn, especially if diminished confidence heightens the economic impact.