Moody’s Ratings has raised its growth forecast for the Indian economy to 7% for the current financial year, from its earlier estimate of 6.5%, citing broad-based economic momentum and the country’s resilience to the energy supply shock linked to the Iran war.In its Global Macro Outlook 2027-28, the US-based rating agency said robust consumption, improving investment dynamics and strong macroeconomic fundamentals should help India sustain growth near 7% over the medium term.“India’s broad-based economic momentum and demonstrated resilience to the energy supply shock warrant upward revisions to our 2026-27 growth forecasts to 7 per cent from 6.5 per cent,” Moody’s said.The agency, however, flagged near-term risks to the growth outlook, including rising price pressures on household consumption, a deficient southwest monsoon and strengthening El Nino conditions that could weigh on agricultural output and rural demand.
Inflation, monsoon pose risks to growth
Moody’s said household consumption remained vulnerable to “intensifying and broadening price pressures”, with headline inflation close to the upper end of the Reserve Bank of India’s (RBI) target range of 2-6%.A weak monsoon and strengthening El Nino conditions could further affect farm output and rural demand, it said.Tighter monetary policy also poses a potential risk to investment. “With the RBI on track to raise rates further, tighter monetary policy could delay the recovery in private investment,” Moody’s added.India’s central bank raised interest rates for the first time in nearly four years in October.Economists polled by Reuters expect headline consumer inflation to rise to 5.93% in October, close to the upper end of the RBI’s tolerance band.The inflation data is due on Thursday. Markets currently anticipate another 90 basis points of monetary tightening over the next 12 months, Reuters reported.Moody’s said a sustained private investment boom that significantly boosts manufacturing, employment and productivity could push growth above its baseline projections.
Energy diversification supports economic resilience
The agency said India had adjusted to the energy price shock better than previously anticipated, helped by its ability to diversify crude oil and gas supplies.State-backed oil marketing companies and tax cuts had also helped shield consumers from the immediate impact of higher energy prices, it said.India’s large refining capacity, including the world’s biggest single-site refining complex, has helped limit fuel supply disruptions while supporting its position as a major exporter of refined petroleum products, Moody’s added.High-frequency indicators point to a possible revival in private capital expenditure. Robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation suggest that India may be approaching a new private investment cycle after several years of corporate and banking sector balance-sheet repair, the agency said.Broader economic activity also remained solid, supported by expanding manufacturing and services purchasing managers’ indexes. Goods and services tax collections, vehicle sales and merchandise exports recorded double-digit year-on-year growth, according to Moody’s.India’s economy grew 7.8% year-on-year in the April-June quarter, according to official data, with investment and manufacturing strength adding to consumer demand.
Global agencies raise India growth projections
Moody’s revision follows a series of upgrades to India’s growth outlook by other international institutions and rating agencies.The Asian Development Bank and S&P had raised their projections for the current financial year to 7%, from 6.6% earlier, while Fitch had revised its estimate to 6.9%. The OECD had projected growth of 7.1%, up from 6.3% in its June outlook.The World Bank also raised its forecast for India’s 2026-27 growth to 7.1% from 6.6% in a report published last month, citing strong domestic demand and exports despite global headwinds. It projected growth of 7.2% for 2027-28.The World Bank had also flagged risks from global oil prices, El Nino and potential stock market corrections that could trigger volatility in capital flows.