Ind-Ra sees India growing near 7% in FY27, private investment lagging

India is expected to maintain relatively strong economic growth in FY27, even as a broad-based revival in private investment may take longer to materialise, according to India Ratings and Research (Ind-Ra).

The domestic ratings agency has projected real GDP growth of 6.9 percent in FY27, easing from an estimated 7.4 percent in FY26, citing resilient macro fundamentals and policy support despite rising global uncertainties.

Ind-Ra said recent reforms — including income tax cuts announced in the FY26 Budget, GST rationalisation, and free trade agreements with Oman, the UK and New Zealand — should help cushion the economy against external headwinds such as trade disruptions stemming from tariff actions in the United States.

However, the agency flagged potential risks, including the possibility of an El Niño weather pattern from mid-2026, which could impact agricultural output and rural incomes.

Services to remain, key growth driver

From the supply side, gross value added (GVA) is projected to grow 6.8 percent in FY27, led primarily by the services and industrial sectors. Services growth is expected to remain robust at 8.1 percent, while industry is forecast to expand 6.2 percent. Agriculture growth, in contrast, is likely to moderate to 3.1 percent.

On the demand side, private final consumption expenditure (PFCE) — which accounts for nearly 56 percent of GDP — is expected to rise 7.6 percent in FY27, marginally higher than the estimated 7.4 percent growth in FY26, even as urban consumption remains subdued.

Capex recovery beyond infrastructure to take time

Private investment continues to be the weakest link in the growth outlook. While capital expenditure momentum is expected to hold up in infrastructure-linked sectors such as power, transmission and logistics, Ind-Ra cautioned that investment recovery across other sectors will be gradual.

“It will still take at least a year for capex to get broad-based,” said Devendra Kumar Pant, Chief Economist at India Ratings. Sectors such as textiles are expected to witness flatter or slower investment growth.

Inflation, rates and external outlook

Inflation is expected to remain within the Reserve Bank of India’s comfort zone. Ind-Ra forecasts average CPI inflation at 3.8 percent in FY27, up from an estimated 2.1 percent in FY26, but still close to the RBI’s medium-term target of 4 percent.

While food price deflation and GST rationalisation have helped contain inflation so far, the agency noted that favourable base effects are likely to fade. As a result, any further policy rate cuts are expected to be limited to 25 basis points, and would depend on incoming data. The RBI has already reduced policy rates by 125 basis points over the past year, bringing the benchmark rate to 5.25 percent.

Externally, the current account deficit is projected to widen slightly to 1.5 percent of GDP in FY27, from 1.3 percent in FY26, while the rupee is expected to average around Rs 92.3 per dollar.

Fiscal consolidation to continue

On the fiscal front, Ind-Ra expects consolidation to continue, with the central government fiscal deficit narrowing to 4.1 percent of GDP in FY27 and the debt-to-GDP ratio easing to 55.5 percent.

The agency remains optimistic that strong GDP growth in FY26, a large RBI dividend and expenditure compression will help the government meet its 4.4 percent fiscal deficit target for the current year.

The size of the Union Budget is estimated at around Rs 52 lakh crore, with net tax revenue growth slowing to about 7 percent, even as capital expenditure growth remains broadly aligned with nominal GDP expansion.

For FY27, nominal GDP growth is projected to accelerate to 9.7 percent, the agency said.