Moody’s Raises India FY27 Growth Forecast to 7%, Flags Oil and Inflation Risks

5paisa Capital Ltd - 0 min read

Last Updated: 18th September 2026 - 12:04 pm

Moody’s has upgraded its projections on India’s economic growth rate for the fiscal year 27 to 7%, which is 1 percentage point higher than its previous forecast of 6%, owing to the country's resilience amidst the Middle East conflict.

Even though Moody’s remains confident about India's outperformance among other countries in the G20 bloc and sovereign emerging markets with a similar rating, there are risks associated with this upgraded forecast, especially energy and inflation issues.

Oil is one of the immediate concerns. Higher global energy prices could feed into inflation and household expenses, with the potential to weigh on consumption and economic activity. Food prices face a separate risk from El Niño-related pressures.

The government’s fiscal response to the Middle East shock has so far remained limited, according to Moody’s. A prolonged period of expensive energy could change that equation by pushing up subsidy spending and creating the need for additional government support.

At the same time, higher spending on defence and infrastructure could leave less room for fiscal consolidation.

The upgrade follows a strong start to the financial year. India’s economy expanded 7.8% in the April-June quarter, helped by investment and manufacturing activity. That growth came despite weaker performance in mining and consumer-facing services.

Moody’s has therefore turned more positive on India’s FY27 growth prospects, but its revised 7% forecast rests against an external environment where energy costs, food inflation and the course of the Middle East conflict remain important risks.

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