Credit rating agency Moody's Ratings has raised its growth forecast for India to 7 per cent from 6.5 per cent for the fiscal year ending March 2027, citing broad-based economic growth and the economy's resilience to the energy supply shock from the Iran war, Reuters reported on Wednesday.

Source: Reuters

"India's broad-based economic momentum and demonstrated resilience to the energy supply shock warrant upward revisions to our 2026-27 growth forecasts to 7 per cent from 6.5 per cent," Moody's said in its Global Macro Outlook 2027-28, adding that strong macroeconomic fundamentals should help India sustain growth near 7 per cent over the medium term, with 2027-28 also pegged at 7.0 per cent.

Why Moody's turned more positive

The agency pointed to robust consumption, improving investment dynamics and strong macroeconomic fundamentals. It said India may be at the cusp of a new private capital expenditure cycle, pointing to high-frequency indicators such as robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilisation. India's economy grew 7.8 per cent year-on-year in the April-June quarter, according to official data.

On energy, Moody's said India had adjusted to the price shock better than previously assumed, helped by its ability to diversify crude oil and gas supplies and to buffer consumers from the immediate price impact through state-backed oil marketing companies and tax cuts. The World Bank, too, raised its forecast for India's 2026-27 growth to 7.1 per cent from 6.6 per cent in a report published last month.

The risks it flagged

Moody's warned that household consumption remains vulnerable to "intensifying and broadening price pressures," with headline inflation now close to the upper end of the Reserve Bank of India's 2-6 per cent target range. It expects consumer inflation to average 4.3 per cent in 2026-27 and 4.0 per cent in 2027-28. Retail inflation hit a 23-month high of 5.54 per cent in September, and October's data, due on Thursday, is expected by economists polled by Reuters to show a rise to 5.93 per cent.

A deficient southwest monsoon and strengthening El Niño conditions could also weigh on agricultural output and rural demand, the agency said. The Reserve Bank of India has projected growth of 7.1 per cent in 2026-27 and 7.0 per cent in 2027-28. (Sources: Reuters, November 11; Moody's Global Macro Outlook 2027-28 as reported by Informist.)