Moody’s raises India’s FY27 growth forecast to 7%

New Delhi: Moody’s Ratings has raised its 2026-27 growth forecast for India’s economy to 7% from 6.5%, citing resilient consumption, improving investment dynamics and the economy’s ability to withstand the global energy shock.

The rating agency expects the country to sustain growth close to 7% over the medium term, with a potential private investment boom offering scope for even faster expansion.

The upward revision follows a similar move by the World Bank, which in October raised its FY27 growth forecast for India to 7.1% from 6.6%.

In its Global Macro Outlook 2027-28, released on 11 November, the global rating agency said India’s strong macroeconomic fundamentals and domestic demand have helped the economy remain resilient despite the global energy shock and that growth is expected to remain at 7% in both 2027 and 2028.

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“High-frequency indicators point to the possibility of a new private investment cycle. Robust production and imports of capital goods, faster growth in industrial credit and rising capacity utilization suggest that companies may be preparing to step up investment after years of balance-sheet repair in the corporate and banking sectors,” it said.

A sustained private investment boom could strengthen manufacturing, create jobs and improve productivity, potentially lifting growth above the agency’s baseline forecast. It assumes significance as net foreign direct investment (FDI) inflows into India rose to $13.8 billion during April-August 2026-27, compared with $9.6 billion in the corresponding period of the previous financial year, according to the Reserve Bank of India’s (RBI’s) data.

Net FDI inflows stood at $3.3 billion in August, compared with a net outflow of $103 million in the same month last year. In July 2026, net FDI inflows were $4.1 billion, RBI data showed.

Economic activity has remained broad-based, with manufacturing and services activity expanding. Moody’s also pointed to double-digit year-on-year growth in GST revenue, vehicle sales and merchandise exports as indicators of continued economic momentum.

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The report attributed India’s resilience to the global energy shock partly to its efforts to diversify crude oil and gas supplies. State-backed oil marketing companies and tax cuts helped cushion the impact on consumers, while the country’s large refining capacity limited fuel supply disruptions and supported exports of refined petroleum products, it said.

“India is also home to the world's largest single-site refining complex, and its large and sophisticated refining capacity has helped limit fuel supply disruptions while supporting its role as a major exporter of refined petroleum products,” the report said.

However, Moody’s flagged risks to the growth outlook. Household consumption could come under pressure if price increases broaden, while a deficient south-west monsoon and a strengthening El Niño could weigh on agricultural output and rural demand.

Inflation remains a concern, with the agency noting that headline inflation is close to the upper end of the Reserve Bank of India’s 2-6% target range. Further interest-rate increases by RBI could also delay the recovery in private investment. Moody’s expects inflation to average 4.5% in 2026, easing to 4.3% in 2027 and 4% in 2028.

According to a Mint poll of 15 economists, India's retail inflation for October 2026 is projected to hit 6%, up from 5.5% in September.

The agency’s assessment comes against a subdued global outlook. It expects global economic growth to slow to 2.6% in 2026 from 2.8% in 2025 and remain around 2.6% through 2028. Higher energy costs, pressure on household purchasing power, tighter monetary policy and geopolitical and trade tensions remain key risks to the global outlook.

Moody’s sovereign credit rating matters for the country as it influences how international investors assess the risk of investing in India and how much the government and Indian companies may have to pay to borrow from overseas markets. A stronger rating helps improve investor confidence and supports access to global capital at more favourable terms. Similarly, a downgrade rating raises borrowing costs and makes investors more cautious.

Dhirendra Kumar is a seasoned policy reporter with about 20 years of experience in deep, on-ground reporting across key economic and governance sectors. His work spans finance, public expenditure, disinvestment, public sector enterprises, textiles, trade, consumer affairs, and agriculture, with a strong focus on uncovering structural policy shifts and their real-world impact.<br><br>Kumar has been awarded the Chaudhary Charan Singh Award for Excellence in Journalism in Agricultural Research and Development, recognising his contribution to reporting on critical issues in the farm sector. He has also been a recipient of a fellowship in international trade from the National Press Foundation, which has further strengthened his coverage of global trade dynamics and their implications for India.<br><br>Kumar is known for breaking complex policy developments into clear, accessible stories. His reporting focuses on uncovering under-reported trends, explaining policy shifts, and helping readers stay informed about developments that shape India’s economic landscape.

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