Moody’s raises India’s FY27 growth forecast to 7% despite global energy shock

Moody’s has raised India’s economic growth forecast for the financial year ending March 2027 to 7%, from its earlier estimate of 6.5%, citing strong domestic demand and the economy’s resilience to the global energy supply shock triggered by the Iran war.

The credit rating agency said broad-based growth, robust consumption and improving investment were helping India withstand external pressures. Strong macroeconomic fundamentals are also expected to support growth close to 7% over the medium term.

India’s economy grew 7.8% year-on-year in the April-June quarter of 2026. Strong manufacturing activity, investment and consumer demand supported the expansion.

Moody’s said India had adapted to higher energy prices better than previously anticipated. Diversification of crude oil and gas supplies has reduced its exposure to global supply disruptions. State-backed oil companies and tax cuts have also helped protect consumers from the immediate impact of rising prices.

The agency also pointed to signs of a recovery in private investment. Rising production and imports of capital goods, faster industrial credit growth and higher capacity utilisation suggest a possible revival in private capital expenditure.

However, Moody’s flagged several risks to the growth outlook. Rising inflation could weaken household consumption, while a deficient southwest monsoon could hurt agricultural output and rural demand.

Tighter monetary policy could also delay private investment by raising borrowing costs.

India’s consumer inflation data for October is scheduled for release on Thursday. Economists polled by Reuters expect inflation to rise to 5.93%, close to the upper end of the Reserve Bank of India’s tolerance band.

The RBI raised interest rates in October for the first time in nearly four years. Markets expect another 90 basis points of monetary tightening over the next 12 months.