India Growth Outlook Stable At 6.7%, Informal Sector Stress Flags Concern

The economic growth forecast for India remains largely consistent, notwithstanding global conflicts, as per a recent survey conducted by Reuters, which states that the country’s GDP will continue growing by 6.7% in fiscal year 2027.

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According to the Reuters poll conducted between April 20–27, covering 54 economists, the FY27 growth estimate is unchanged from the March forecast. This compares with an estimated 7.0% growth for the year ended March 31, 2026. FY28 growth estimates were within a range of 5.9% to 7.5%, with anticipated growth for FY29 at 6.8%.
Influence of the Informal Sector Evident

According to economists, even as GDP estimates have not seen much fluctuation, the hidden stress in the informal economy sector has not been captured. The informal sector has historically accounted for nearly 50% of India’s GDP, according to economists cited by Reuters.

Due to the lack of real-time information about employment status, fuel prices, and demand, quantification of the full effects is hard. Nonetheless, anecdotal information shows the disruptions are beginning to show their effects, mainly in urban centers, which produce 60% of the country’s GDP. 

Hotels and restaurants have cut down working hours, reduced their services, or switched to other forms of fuel due to disruptions in liquefied petroleum gas supply from the Middle East conflict, Reuters reported.

Inflation And Policy Outlook

The poll showed inflation is expected to average 4.5% in FY27, remaining within the Reserve Bank of India’s target range of 2%–6%. However, economists pointed out that price pressures had increased compared to the previous year.

Moreover, the survey also predicted that the Reserve Bank of India would keep its interest rates stable till 2027.

Fiscal Risks due to Persistent Conflict

It was pointed out by the economists that the persistent Middle East conflict may affect India’s fiscal position. As India has already taken some measures like reducing fuel taxes to curb price pressures, a persistent increase in international energy prices may necessitate a reallocation of funds.

As per the information shared by Reuters, it is possible that spending from capital expenditure may be allocated for subsidies. This comes at a time when private investment has remained subdued.

Investment And Demand Outlook

As economists pointed out, there were still problems related to uncertainties associated with international developments and rising costs of energy, which continued to negatively influence investor confidence. Absence of a quick recovery in investment activity remains a serious problem for now.

On the other hand, the limited capacity of the informal economy to cope with shocks might be indicative of more serious problems down the road.

While headline growth projections remain steady, the divergence between formal economic indicators and conditions in the informal sector continues to be closely tracked by economists, according to the Reuters poll.