India’s GDP growth forecast for FY27 was downgraded by global rating agency Fitch Ratings on Tuesday from its previous estimate of 6.7 per cent to 6.4 per cent, citing the economic impact of the continuing West Asia crisis and rising oil prices that are expected to have a significant effect on
consumer demand.
“We expect GDP growth to ease to 6.4 per cent in FY27, a downward revision of 0.3 per centage points from March," Fitch stated in its June edition of the Global Economic Outlook. The Indian economy is expected to slow down from the 7.4 per cent growth recorded in FY26 as inflationary forces continue to erode household buying power despite continued strength in capital expenditure,” said the report.
It added that, “Domestic demand will remain the main driver of growth, although lower imports in real terms are expected to support growth through positive net external demand.”
The agency believes that the slowdown would be most noticeable in the second and third quarters of FY27, when consumer spending is projected to decline due to increased fuel and energy costs resulting from the West Asia war. In recent weeks, fuel prices have increased by about 4-5 per cent.
Interestingly, Fitch’s report has come days after the Reserve Bank of India (RBI) lowered its own growth prediction for FY27 to 6.6 per cent and increased its inflation estimate to 5.1 per cent.
Beyond the current fiscal year, Fitch predicted that as consumer spending and investment activity increase and energy market pressures decrease, economic growth should go up to 6.7 per cent in FY28. After that, growth is predicted to slow down to 6.4 per cent in FY29, more in line with its long-term trend.
Additionally, Fitch downgraded its 2026 global economic growth forecast by 0.2 percentage points to 2.4 per cent, citing the shock to oil prices spurred by the West Asia conflict.
Brian Coulton, Chief Economist at Fitch Ratings, said, “The oil price shock is hitting world growth prospects and increasing downside risks. However, a pronounced boom in global IT spending is helping cushion the impact, particularly across Asia.”
