India’s economic growth will drop to 6.7 per cent in the current fiscal year FY27 due to slower supply and demand amid the ongoing uncertainty surrounding the West Asia issue, as per India Ratings & Research (Ind-Ra) report.
The agency forecasts that GDP growth in FY27 will be hampered by rising fuel and food prices spurred by the unpredictability of the West Asia conflict and the anticipated impact of the evolving El Nino on agriculture starting mid-2026.
In addition, the Indian economy is expected to have expanded by 7.6 per cent in FY26.
It also stated that despite recent increases in fuel prices, retail inflation probably is going to remain within the Reserve Bank of India’s (RBI) limit range of 4.4 per cent. When compared to the RBI’s estimates of 4.6 per cent inflation and 6.9 per cent GDP growth, Ind-Ra’s forecasts are lower.
Ind-Ra Director, Economics, Megha Arora, said, “Major headwinds include geopolitical developments, particularly the West Asia conflict, high headline inflation, a depreciated currency from weak capital inflows, weaker-than-expected capex especially by the government to reduce fiscal risks, weak global trade growth, strong FY26 growth (base effect), low industrial production as measured by the Index of Industrial Production (IIP), and notably, the likely El Nino weather pattern from mid-2026.”
Ind-Ra has projected that the average price of oil will be USD 95 per barrel in FY27. The government, oil marketing firms, and consumers will all bear some of the cost of the high price of oil globally, with consumers bearing the least amount.
According to Arora, the agency predicts that a 10 per cent decrease in capital expenditures may limit GDP growth to 6 per cent, while a USD 10/bbl increase in crude oil prices might reduce GDP growth by 44 basis points.
In order to protect individuals and small businesses from the effects of the West Asia crisis, Ind-Ra forecasts that the government would declare easy access to credit and policies like credit guarantees rather than direct cash transfers.
GDP growth for the current fiscal year’s April-June quarter is expected to be 6.7 per cent, and the El Nino effect is expected to be more noticeable in the July-September quarter than in the June quarter.
The rupee-dollar exchange rate would average Rs 94.28 in FY27, a 6.7 per cent year-over-year decline. On Tuesday, the Indian rupee fell to a historic low of 96.47 to the US dollar, the report shows.
