S&P Global raises India’s FY27 GDP growth projection to 7.1%

New Delhi: S&P Global on Wednesday raised India’s FY27 growth forecast by 40 basis points to 7.1%, citing modest recovery in private investment, resilient consumption and exports.

However, the global rating agency underlined that the ongoing West Asia conflict may drag the growth.

“We project real GDP growth to moderate to 7.1% in the fiscal year ending in March 2027, compared with 7.6% in fiscal 2026. Key drivers are resilient private consumption, a modest recovery in private investment, and solid exports,” S&P Global said in its latest quarterly economic outlook on Asia-Pacific.

“But downside risks prevail, primarily due to the renewed geopolitical tensions and persistent trade-related uncertainties. These risks could affect India through fluctuations in commodity prices, trade volumes, and capital flows,” it said. In its previous report, S&P Global had pegged India’s 2026-27 growth projection at 6.7%.

India’s GDP is projected to grow by 7.6% in the current fiscal, as per the estimates released by the Ministry of Statistics and Programme Implementation last month.

In the Economic Survey, the government has pegged the 2026-27 growth projection in the range of 7-7.4%.

S&P Global has also upgraded its projections on India’s GDP growth for FY28 by 20 basis points to 7.2%, and FY29 by 20 basis points to 7.0%, pointing to sustained expansion over the medium term.

The ratings agency expects retail inflation in India to rise to 4.3% in FY27. While higher global crude prices may push up domestic fuel prices, the rating agency does not anticipate a full pass-through, as the government is likely to act to contain subsidy burdens. 

“In India, the RBI would likely tighten policy in response to energy-price inflation, after assessing its persistence. We would expect one 25 bps rate hike in the second half,” it said.

“We expect inflation to rise to 4.3% in fiscal 2027 as it normalises from low levels. Higher crude prices will likely widen the trade deficit, but a healthy surplus in services trade should help contain the current account deficit. Overall, we expect the central bank to hold rates steady and maintain a neutral stance,” the rating agency said, noting that the energy shock would curb central banks’ appetite to cut policy rates.

On the global economy, S&P Global noted that the growth would mostly hold up even in the face of war. “Global activity has derived support from strong AI-related investment spending on tech products, especially in the US, and accommodative fiscal and monetary policy in several major economies,” it said.

It further noted that the US tariff relief is likely to be temporary. The current global US levies can be applied up to 150 days. “We expect the US government to replace them in the coming months by country and sector-specific tariffs, using statues invoking ‘unfair trade practices’, under section 301 of the Trade Act, and ‘national security concerns’,” it added.