Credit ratings agencies Moody's and S&P Global have raised their forecasts for India's GDP growth in fiscal 2027 to 7%, citing resilience in the Middle East and robust economic activity. Moody's raised its forecast from 6% to 7%, while S&P increased its projection from 6.6% to 7%, according to reports from Livemint and NDTV.

Moody's attributed the upward revision to India's resilience amid the Middle East conflict, though it warned that high government debt, weak debt affordability, and low per capita income continue to constrain the country's credit profile. The agency also highlighted risks such as elevated energy prices and El Niño-related food price pressures, which could affect inflation, consumption, and growth.

S&P Global, in its Economic Activity for Asia Pacific report, noted that India's economy grew at 7.8% in the April-June quarter, driven by strong consumption, exports, and government investment. The agency projected consumer inflation to average 5.1% in FY27 and expected the Reserve Bank of India to raise interest rates by 25 basis points. S&P also warned that growth could ease in the second half of the fiscal year as some tailwinds, such as tax reforms, diminish.

Both agencies acknowledged the impact of weather-related risks, particularly the effects of El Niño on agriculture and food inflation. S&P noted that cumulative rainfall was 15% below normal in the current monsoon season, which could affect agricultural output. Moody's similarly warned that higher energy prices could increase subsidy spending and pressure the government to provide additional support.

The 7% growth forecast for FY27 places India as the fastest-growing G20 economy, surpassing projections from the RBI and Fitch Ratings. However, the agencies emphasized that risks remain, including inflationary pressures, unresolved conflicts in the Middle East, and the potential for weaker monsoons to impact the agricultural sector.

The Indian government has not commented on the revised growth forecasts or the associated risks. The Ministry of Finance and the Reserve Bank of India have not issued statements addressing the agencies' assessments.

Several uncertainties remain. The actual impact of the Middle East conflict on India's economy is still under assessment, and the extent to which El Niño will affect monsoon patterns and agricultural output is not yet clear. Additionally, the effectiveness of fiscal and monetary policies in mitigating inflation and supporting growth remains to be seen. The agencies' forecasts are based on current data and assumptions, and future developments could alter these projections.