Fitch Revises Down India's FY27 GDP Growth Forecast To 7% On War Impact

The ongoing war in West Asia is set to take a toll on the growth prospects of India. India may grow at a rate of 7 percent in financial year 2026–27 compared to the earlier expected growth of 7.7 percent, according to a report by ANI citing BMI, a Fitch Solutions unit.

The downward revision in the forecast is explained by the impact of the Iran war on the domestic economy. The rating agency had earlier revised its FY26 growth forecast for India from 7.8 percent to 7.6 percent due to the same reason.

The report highlighted the slowed economic momentum continuing from the previous financial year into the current year.

The report said that the Iran war may continue to rage for another month. If that happens, companies across sectors may have to face heightened energy costs.

“Our Middle East team now expects the conflict to last for another month. Aside from raising business costs through higher energy prices, the conflict will also keep uncertainty elevated. This discourages investment and further drags down GDP growth,” the report said.

The report also mentioned the deteriorating indicators that led to the downward revision.

India’s industrial production expanded by just 4.3 percent year-on-year in the first quarter of FY26, which was a steep decline from 5.3 percent in the previous quarter.

Also, the value of real-time gross settlement transactions in India’s financial system fell by more than 11 percentage points to 0.7 percent.

However, the report also expected the war impact to get contained due to supportive monetary policy measures, alternatives to meet energy needs, and a proactive government.

It considered the Reserve Bank of India’s monetary policy to be conducive to growth. The RBI had slashed policy rates by 125 basis points in 2025. The rating agency expects the policy to remain supportive going forward.

Also, India has options like Russia to manage its energy needs until the war gets over. The government has already given relief in excise duties on fuel prices, which would ensure prices remain stable amid rising import costs.