Moody’s raises India FY27 growth forecast to 7%, flags debt, energy price risks

The latest market report highlights that Moody’s Ratings has boosted its expansion forecast for India for the current financial year by a full percentage point to 7 percent, citing stronger-than-anticipated economic momentum and the economy’s resilience to disruptions triggered by the conflict in the Middle East.

The ratings agency had earlier projected India’s GROSS DOMESTIC PRODUCT to expand 6 percent in FY27.

India’s real GROSS DOMESTIC PRODUCT expansion accelerated to 8.2 percent year-on-year during the first six months of calendar year 2026, compared with 7.3 percent for the full year 2025, supported by stronger private consumption, robust capital formation and sustained resilience in services, Moody’s stated in its periodic review of India’s sovereign ratings.

The review, completed by a rating committee on September 10 and announced on September 18, does not constitute a rating action.

India keeps hold Moody’s Baa3 rating, with a stable outlook.

Expansion stays a key resilience

Moody’s anticipates India to continue growing faster than all other G20 economies.

The agency stated infrastructure spending, digitalisation and resilient private consumption have supported economic expansion, while stronger expansion has additionally helped the government reduce its fiscal deficit.

Gross set capital formation has remained robust, reflecting continued public investment in infrastructure and what Moody’s described as a likely revival in private-sector investment.

That stated, the ratings agency warned that risks to the outlook have increased.

A prolonged Middle East conflict and elevated global energy prices could propel average inflation above Moody’s FY27 forecast of 4.8 percent, sharply elevated than the 2.4 percent recorded in FY26. El Niño-related disruptions could additionally raise food prices and weaken household consumption.

India’s diversification of oil suppliers, sizeable foreign-exchange reserves and firm domestic demand provide buffers, but elevated energy and fertiliser import costs, softer global demand and weaker remittance inflows from the Middle East could widen the current account deficit and weigh on expansion, Moody’s stated. Debt stays the weak spot

Despite the stronger expansion outlook, Moody’s does not expect a material slide in India’s debt burden over the next two to three years.

The agency anticipates the Centre to stick to its fiscal deficit target of 4.3 percent of GROSS DOMESTIC PRODUCT in FY27, compared with 4.4 percent a year earlier. But elevated energy subsidies, rising defence spending and continued infrastructure expenditure could constrain the pace of fiscal consolidation.

India’s predominantly domestic investor base gives the government financing flexibility and limits foreign-exchange risks. That stated, debt affordability is anticipated to stay weaker than similarly rated peers because of the country’s high debt burden and elevated interest costs.

A more substantial improvement in debt affordability, sustained topline mobilisation and structural reforms that lift private investment and per capita incomes could create upward pressure on the rating, Moody’s stated.