New Delhi: Fitch Ratings has lowered its growth outlook for India for the financial year 2026-27 (FY27), citing rising global uncertainties and the impact of the ongoing conflict in West Asia.
The global credit rating agency now expects India’s economy to grow by 6.4 percent in FY27. This is 0.3 percentage points lower than its forecast made in March.
According to Fitch, higher oil prices and geopolitical tensions are likely to affect economic activity over the coming quarters.
Domestic Demand To Remain Key Support
Despite the downgrade, Fitch believes India will continue to be one of the fastest-growing major economies in the world.
The agency said domestic demand will remain the biggest driver of growth. Household spending, investments and government expenditure are expected to support economic activity.
Fitch also noted that lower imports could contribute positively to growth through improved net external demand.
Recovery Expected In FY28
Looking ahead, Fitch expects growth to improve in FY28.
The agency forecasts India’s GDP growth at 6.7 percent in FY28 as global conditions stabilise and the Middle East crisis eases.
Stronger consumer spending and higher investments are expected to support this recovery. However, growth is likely to moderate again to around 6.4 percent in FY29, which Fitch considers India’s long-term trend growth rate.
Oil Shock Creating Global Risks
Fitch Chief Economist Brian Coulton said rising oil prices are creating fresh challenges for economies around the world.
He noted that the oil price shock is weakening global growth prospects and increasing downside risks.
However, a strong increase in global spending on information technology is helping offset some of the economic pressure, especially across Asian economies.
Inflation Risks Remain Elevated
Fitch said inflation in India has not increased sharply so far but is expected to move higher in the coming months.
The agency projects inflation to reach 5.3 percent by the end of 2026 due to higher energy costs and base effects.
It also warned that below-normal monsoon rainfall forecasts and ongoing heatwave conditions in some regions could push food prices higher.
Rupee Outlook And RBI View
On the currency front, Fitch said it does not expect any major depreciation in the Indian rupee during the remainder of the year.
Meanwhile, the Reserve Bank of India has projected GDP growth of 6.6 percent for FY27. The central bank has cautioned that global supply-chain disruptions, financial market volatility and weather-related shocks continue to pose risks to the growth outlook.
