India's economic growth is expected to slow in the current financial year as rising energy prices, inflationary pressures and global geopolitical tensions weigh on domestic demand, according to Fitch Ratings.
The global ratings agency has revised its FY27 GDP growth forecast for India to 6.4 percent from 6.7 percent earlier, citing the economic impact of the ongoing conflict involving Iran, Israel and the US.
The revised outlook comes days after the Reserve Bank of India lowered its own FY27 growth forecast to 6.6 percent and raised its inflation projection to 5.1 percent.
Fitch expects economic growth to moderate from 7.4 percent in FY26 to 6.4 percent in FY27. The agency said domestic demand will remain the primary driver of growth, while lower imports could provide some support through net external demand.
According to Fitch, the slowdown is likely to be most visible during the September and December quarters as higher prices erode household purchasing power and weigh on consumer spending, even as capital expenditure remains relatively resilient.
The ratings agency has also reduced its global growth forecast for 2026 to 2.4 percent, warning that an extended energy crisis could hurt economic activity worldwide.
Fitch expects growth to recover to 6.7 percent in FY28 as the impact of the energy shock begins to fade. Stronger consumer spending and investment activity are expected to support the rebound before growth settles at around 6.4 percent in FY29.
While consumer inflation has remained relatively contained so far, Fitch believes price pressures are gathering momentum.
Wholesale prices rose 8.3 percent year-on-year in April, while retail inflation increased to 3.5 percent. The agency expects inflation to rise steadily in the coming months and reach 5.3 percent by the end of calendar year 2026.
Higher energy prices, unfavourable base effects, concerns over below-average monsoon rainfall and ongoing heatwave conditions in parts of the country could further accelerate price increases.
The RBI kept its policy rate unchanged at 5.25 percent in April. However, Fitch expects the central bank to raise rates once during the current fiscal year, taking the policy rate to 5.5 percent in response to rising inflationary pressures.
The ratings agency also forecasts the rupee to average around ₹97.50 against the US dollar during FY27. It does not expect any significant further depreciation in the Indian currency over the remainder of the year.