Global rating agencies S&P Global Ratings and Fitch Ratings have raised their growth forecasts for India for the current financial year, following stronger-than-expected economic expansion in the June quarter.
The revisions come after India’s GDP growth accelerated to 7.8% in the April-June quarter, prompting global agencies to reassess their outlook for the world’s fastest-growing major economy.
S&P has increased its FY27 growth forecast to 7% from 6.6%, while Fitch has revised its projection to 6.9% from 6.4%. Both agencies have cited stronger domestic demand and robust first-quarter growth as key reasons behind the upgrade.
The upward revisions follow a similar move by Moody’s, which recently raised India’s growth forecast for FY27 to 7% from 6%.
However, both S&P and Fitch expect economic momentum to moderate in the second half of the financial year as the impact of recent tax cuts and GST rationalisation measures fades. They also warned that inflationary pressures could rise due to geopolitical tensions in West Asia and weaker-than-normal monsoon rainfall.
S&P said India’s growth will continue to benefit from strong domestic demand, but highlighted risks from food inflation and rural consumption due to uneven rainfall.
“Growth is expected to ease in the second half of the fiscal year as the benefits from GST rationalisation and income tax cuts diminish,” S&P said.
The agency noted that cumulative monsoon rainfall was 15% below normal levels until September 9, which could affect farm output and food prices.
Fitch also expects growth to slow in the coming quarters, citing moderation in manufacturing and services activity, weaker rural demand due to below-normal rainfall, and rising inflation that could affect consumer spending.
Despite these risks, Fitch expects private investment to remain supportive, projecting more than 10% growth in private investment during FY27.
For FY28 and FY29, Fitch expects India’s economic growth to stabilise at around 6.5% as energy price pressures ease and consumption and investment continue to drive expansion.
Both agencies expect the Reserve Bank of India (RBI) to increase interest rates this financial year as inflation risks build.
S&P expects the RBI to raise the policy rate by 25 basis points to 5.5% in FY27, citing strong growth, persistent inflation pressures, West Asia tensions and weather-related risks.
Fitch expects two rate hikes — one in the October monetary policy meeting and another in early 2027 — taking the cumulative increase to 50 basis points.
According to Fitch, the combination of strong demand, rising prices and supply-side challenges could prompt the central bank to tighten monetary policy before rates ease later.
S&P expects India’s consumer price inflation to average 5.1% in FY27, slightly above the RBI’s projection of 5%.
Fitch expects retail inflation to rise in the near term, reaching 5.5% by December from 4.82% in August, before moderating.
, energy market volatility and uneven weather conditions.
