Moody’s cuts India FY27 growth to 6%
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New Delhi: Moody’s Ratings has lowered India’s GDP growth forecast for FY27 to 6 per cent from 6.8 per cent earlier, citing the economic fallout of the ongoing West Asia conflict.
In its latest credit opinion, Moody’s warned that prolonged disruptions, especially in liquefied petroleum gas (LPG) supplies, could trigger household shortages, raise fuel and transport costs, and spill over into food inflation due to India’s dependence on imported fertilisers.
The region accounts for nearly 55 per cent of India’s crude oil imports and over 90 per cent of LPG supplies, making the economy highly vulnerable to supply shocks.
While inflation remains under control for now, Moody’s said risks are rising. It expects inflation to average 4.8 per cent in FY27, up sharply from 2.4 per cent in FY26. As a result, interest rates are likely to remain elevated or see gradual hikes depending on how geopolitical tensions evolve.
Growth moderation will be driven by weaker private consumption, softer industrial activity and slowing investment momentum, as high energy prices push up input costs and compress corporate margins.
The agency also flagged fiscal pressures, noting that elevated oil, gas and fertiliser prices could increase subsidy burdens while eroding revenues. Recent cuts in fuel excise duties are expected to further dent tax collections.
Higher expenditure commitments and weaker revenue mobilisation could constrain fiscal space and slow the pace of deficit reduction, unless offset by corrective measures.
Other agencies echo similar concerns. The OECD has projected FY27 growth at 6.1 per cent, while ICRA estimates 6.5 per cent. EY has warned that prolonged conflict could shave off up to 1 percentage point from growth and raise inflation significantly.
India’s external position remains stable for now, but risks persist. Rising import costs, weaker export demand from West Asia, and potential disruptions to remittance inflows could widen the current account deficit.
Despite these challenges, Moody’s expects gradual fiscal consolidation and continued support from infrastructure spending.
