New Delhi: India is projected to record another year of solid economic growth in the financial year 2026–27, even as global uncertainties continue to pose challenges, according to a report released by India Ratings and Research on Tuesday.
The ratings agency has forecast India’s real GDP growth at 6.9 per cent in FY27, marginally lower than the estimated 7.4 per cent growth expected in FY26. Despite this moderation, the outlook remains resilient, supported by strong macroeconomic fundamentals and recent policy initiatives.
India Ratings noted that government measures such as income tax reductions announced in the FY26 Union Budget, GST rationalisation, and the signing of free trade agreements with countries including Oman, the United Kingdom, and New Zealand are likely to support economic momentum. These factors are expected to help insulate the Indian economy from external shocks, particularly global trade disruptions arising from tariff-related uncertainties in the US.
At the same time, the report highlighted potential risks on the horizon, including the possibility of an El Niño weather event from mid-2026, which could negatively affect agricultural output and rural incomes.
Sector-wise, the services segment is expected to remain the key driver of growth, expanding by a strong 8.1 per cent in FY27. Industrial growth is projected at 6.2 per cent, while agriculture is expected to grow at a relatively modest 3.1 per cent.
On the demand side, private final consumption expenditure (PFCE), which contributes nearly 56 per cent to GDP, is projected to grow by 7.6 per cent in FY27, slightly higher than the estimated 7.4 per cent in FY26.
In terms of investment, capital expenditure in infrastructure-related sectors such as power, transmission, and logistics is expected to remain robust. However, the agency cautioned that a broad-based revival in private investment will take more time, with sectors like textiles likely to witness slower or stagnant investment growth.
“It will still take at least a year for capex to become broad-based,” said India Ratings’ Chief Economist Devendra Kumar Pant.
On the inflation front, the report expects price pressures to remain contained. Average CPI inflation is forecast at 3.8 per cent in FY27, up from an estimated 2.1 per cent in FY26, but still within the Reserve Bank of India’s target midpoint of 4 per cent. While food price deflation and GST rationalisation have helped keep inflation low, favourable base effects are expected to diminish over the coming year.
Given this backdrop, India Ratings said any further policy rate cuts by the RBI are likely to be limited to 25 basis points and will depend entirely on incoming economic data. Over the past year, the central bank has already reduced policy rates by 125 basis points, bringing the benchmark rate down to 5.25 per cent from 6.5 per cent.
Regarding the external sector, the current account deficit is projected to widen slightly to 1.5 per cent of GDP in FY27, compared to 1.3 per cent in FY26. The Indian rupee is expected to average around Rs 92.3 against the US dollar during the year.
With inputs from IANS
