Moody’s Cuts India’s 2026 GDP Growth Forecast To 6% Amid Rising Energy Costs

Moody’s Ratings on Tuesday reduced India’s GDP growth forecast for 2026 by 0.8 percentage points to 6%, citing higher energy costs, weaker private consumption and slowing industrial activity amid continued geopolitical tensions in West Asia.

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In its Global Macro Outlook May update, Moody’s said India’s economic growth is expected to slow due to elevated crude oil prices, tighter financial conditions and disruptions linked to the ongoing confrontation between the U.S. and Iran.

The rating agency also lowered India’s 2027 GDP growth estimate by 0.5 percentage points to 6%. Moody’s had earlier projected stronger economic growth for both years.

Higher Energy Prices Weigh On Economy

Moody’s said India remains particularly vulnerable to higher oil prices because of its dependence on imported energy.

India imports nearly 90% of its crude oil and liquefied natural gas (LNG) requirements. The agency noted that rising fuel and fertiliser costs could increase pressure on government finances and affect planned capital expenditure.

According to Moody’s, its central growth forecast of 6% for both 2026 and 2027 follows an estimated growth of 7.5% in 2025.

The agency said slower private consumption, weaker capital formation and softer industrial activity are expected to impact overall economic momentum.

Moody’s added that persistently high energy prices could keep inflation elevated and reduce corporate profitability.

Strait Of Hormuz Disruptions Raise Concerns

The report highlighted concerns around continued disruptions in the Strait of Hormuz, a key global energy shipping route.

Moody’s said prolonged shipping restrictions and uncertainty around the U.S.-Iran situation could affect global energy and food supplies.

India imports around 60% of its LPG requirements, and nearly 90% of those supplies pass through the Strait of Hormuz.

The agency stated that Asia-Pacific economies remain among the most exposed to energy supply disruptions linked to the region.

India Increasing Russian Oil Imports

Moody’s said several Asian economies are diversifying crude oil sourcing strategies amid ongoing geopolitical uncertainty.

According to the report, India has increased imports of Russian crude oil, while countries such as Japan and South Korea are gradually increasing purchases from the U.S.

The agency also noted that coal continues to account for around 70% of India’s electricity generation, although renewable energy sources, including solar, wind and hydro power, are expanding steadily.

Moody’s said the duration of disruptions in the Gulf region and movements in crude oil prices will remain key factors influencing India’s growth outlook over the coming quarters.