India FY27 GDP Growth Seen at 6.8% Amid West Asia Crisis, El Niño Fears
India Ratings and Research (Ind-Ra) has projected India's gross domestic product (GDP) growth to decelerate to 6.8% in the current financial year (FY27), down from 7.6% in the previous year. The agency attributes this slowdown to uncertainties arising from the West Asia conflict, a weakening rupee, and the likely impact of El Niño on agriculture.
The revised projection is marginally higher than the 6.7% growth the agency had forecast in May. It also comes after the Reserve Bank of India (RBI) raised its own growth estimate for FY27 to 6.7% from 6.6%, citing a resilient domestic economy.
Ind-Ra, a Fitch Group subsidiary, stated that the slower growth outlook is driven by higher fuel and food inflation stemming from the ongoing West Asia conflict, combined with a weak currency and potential agricultural disruptions due to El Niño.
The agency now assumes an average crude oil price of $85 per barrel for FY27, a significant downward revision from the $95 per barrel it had projected in May 2026. It expects the rupee-dollar exchange rate to average ₹93.98 in FY27, reflecting a depreciation of 6.4% year-on-year. This is a marginal improvement from its earlier assumption of ₹94.28.
On capital flows, Ind-Ra estimates inflows of $70 billion through foreign currency non-resident (bank) (FCNR B) deposits and external commercial borrowings (ECBs) during the fiscal year.
The agency has also released its quarterly GDP growth forecasts for FY27. It projects 6.9% growth for April-June, 6.6% for July-September, 6.7% for October-December, and 6.9% for January-March. In comparison, the RBI's projections are 7%, 6.4%, 6.5%, and 6.8% for the respective quarters.
Ind-Ra Chief Economist and Head of Public Finance, Devendra Pant, noted that the Indian basket crude oil price averaged $101.31 per barrel in the June quarter of FY27 and $96.49 per barrel for April-July 2026. "Our crude oil price assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade and current account deficit. However, higher inflation due to El Niño may limit growth upside from lower oil prices," Mr. Pant said.
The agency estimates retail inflation to average 4.9% in the current fiscal year, compared to a low 2% in FY26. The current account deficit is projected to widen to 1.5% of GDP, up from 0.6% in the previous year.
Regarding the fiscal landscape, Ind-Ra said the FY27 fiscal deficit target of 4.3% remains challenging due to subsidies on liquefied petroleum gas and fertilisers. While direct tax collections and non-tax revenue may support achieving the target, indirect tax collections could pose difficulties, Mr. Pant added.
