GDP growth may ease to 6.9% in FY27: India Ratings & Research

New Delhi: India’s economic growth may decline to 6.9% in 2026-27 from the projected expansion of 7.4% in the current fiscal, India Ratings & Research (Ind-Ra) said on Tuesday.

Services sector is projected to remain the key driver of economic expansion with 8.1% growth in 2026-27, marginally lower than 8.3% in the current fiscal. Industry sector growth is estimated to ease from 7.1% in the current fiscal, to 6.2% in 2026-27, and agriculture sector growth is likely to decline from 3.6% in 2025-26, to 3.1% in 2026-27.

Addressing reporters, Ind-Ra Chief Economist Devendra Kumar Pant said GST rate rationalisation, income tax rate cut, trade deals with Oman, New Zealand and the UK and other reforms would shield the economy from global turbulence.

According to Pant, major headwinds include the El Niño pattern from mid-2026; weak currency due to weak capital flows; sluggish global trade growth; strong growth in FY26 (base effect); slower growth of net production taxes due to GST rationalisation and AI.

The headline retail inflation is likely to increase to 3.8% in 2026-27, from the estimated 2.1% in the current fiscal. The Wholesale Price Index (WPI) based inflation is projected to increase to 2.3% in 2026-27, from 0.3% in 2025-26.

Retail and wholesale inflation averaged 1.8% and negative 0.1%, respectively, during the first eight months of the current fiscal.

One of the key reasons for the low retail and wholesale inflation in FY26 has been the deflation in food products both in CPI and WPI. The GST rationalisation in September 2025 made a structural change in prices, and inflation is expected to remain within the RBI’s target in FY27. Inflation in H2FY27 will have an unfavourable base effect.

Stable agriculture growth and low inflation are likely to keep the rural real wage rate of agriculture in positive territory, supporting consumption growth in FY27. Low inflation should also maintain real minimum urban wages growth positive, and real wages in non-financial private corporates are likely to rise from the present level, he said.