Fitch Raises India's FY27 Growth Forecast To 6.9% On Strong Economic Activity, Investment Momentum
· Free Press Journal
Fitch Ratings has revised upwards its India growth forecast for financial year 2026-27 to 6.9% from the earlier estimate of 6.4%, supported by stronger economic momentum and the economy’s ability to withstand energy price disruptions linked to the US-Iran conflict.
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The rating agency said India’s growth performance has exceeded its earlier expectations, leading to a 50-basis-point increase in its forecast.
The economy recorded 7.8% year-on-year growth in the April-June quarter, while expansion in the previous quarter accelerated to 8.6%. As a result, Fitch now estimates FY26 growth at 7.8%, higher than its earlier projection of 7.4%.
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Despite raising its forecast, Fitch expects economic growth to moderate in the coming quarters. The agency pointed to slower expansion in manufacturing and services, below-normal monsoon rainfall and potential pressure on rural demand.
Fitch also warned that higher inflation could affect household purchasing power and consumer spending. However, private investment is expected to remain a key driver of growth.
The agency projects fixed investment to rise 10.6% in FY27, compared with 8% in FY26. Non-food credit growth also accelerated to 19% year-on-year in July, indicating stronger lending activity.
Consumer spending growth is expected to slow to 5.7% in FY27 from 7.2% in the previous year. Fitch forecasts GDP growth at 6.5% for FY28 and FY29.
Inflation and interest rate risks
Fitch highlighted inflation as a major risk to India’s economic outlook. The agency expects inflation to rise to 5.5% by December 2026 before gradually moving towards the Reserve Bank of India’s 4% target.
It expects the RBI to increase the policy rate by 25 basis points to 5.5% in October, followed by another hike in early 2027. Rates could later ease to 5.5% in 2028.
Fitch expects the rupee to remain stable in the near term before weakening gradually, with the dollar-rupee exchange rate projected at 95 by end-2026 and 98 by end-2027.