India Ratings pegs GDP at 6.8% as multiple headwinds intensify

MOMENTUM UNDER PRESSURE | Oil, rupee risks cloud FY27 economic outlook

PTI New Delhi

India Ratings & Research on Tuesday projected India's GDP growth to slow down to 6.8% in the current fiscal year, as against 7.6% in the previous year, citing risks from fuel and food inflation stemming from West Asia conflict's uncertainty, weak currency, and the likely impact of El Nino on agriculture.  

The FY27 GDP growth projection at 6.8% is a tad higher than the 6.7% growth Ind-Ra had projected in May. 

Earlier this month, the Reserve Bank of India had raised growth projections from 6.6% to 6.7% citing resilient domestic economy. 

The domestic rating agency said it now estimates average crude oil price at USD 85/bbl in FY27 compared to USD 95/bbl in May 2026. It expects rupee-dollar exchange rate to average ₹93.98 (May 2026: ₹94.28), a depreciation of 6.4% year-on-year, in FY27. 

Fitch Group subsidiary Ind-Ra estimates capital flows of USD 70 billion under foreign currency non-resident (bank) and external commercial borrowings. 

The slowdown in GDP growth in FY27 vis-a-vis FY26 is attributed to higher fuel and food inflation stemming from the West Asia conflict's uncertainty, weak currency, and the likely impact of El Nino on agriculture, Ind-Ra stated. 

The agency has forecast quarterly GDP growth at 6.9, 6.6, 6.7, and 6.9% for April-June, July-September, October-December, and January-March as against the RBI's prediction of 7, 6.4, 6.5, and 6.8%, respectively. 

Ind-Ra Chief Economist and Head - Public Finance Devendra Pant said crude oil price of the Indian basket averaged USD 101.31/bbl in the June quarter of FY27 and USD 96.49/bbl for April-July 2026. 

"Our crude oil price assumption for FY27 is USD 85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit. However, higher inflation due to El Nino may limit growth upside from lower oil prices," Pant stated. 

Ind-Ra estimates retail inflation to average 4.9% in the current fiscal year, compared to 2% in FY26. Current account deficit is estimated to rise to 1.5% of GDP, from 0.6% in FY26. 

The FY27 deficit target of 4.3% remains challenging due to subsidies on liquefied petroleum gas and fertilisers. While direct tax collection and non-tax revenue may support achieving the fiscal deficit target, indirect tax collection may pose challenging, Pant stated.