MUMBAI: Leading rating agencies have once again revised downward India's GDP growth estimates for the upcoming quarters and through 2027, citing the adverse impact of the ongoing war in West Asia on the economy. Following revisions by global ratings major Moody's and domestic major Crisil last week, on Tuesday, ICRA (the local arm of Moody's) and India Ratings & Research (the domestic arm of global major Fitch) further slashed India's GDP growth forecasts.
India Ratings' Revised Projections
India Ratings expects India's GDP to grow at 6.7% in FY27, down from 7.6% in FY26 and below the Reserve Bank of India's estimate of 6.9%. The agency highlighted that the Indian economy faces significant risks from high crude prices, geopolitical tensions in West Asia, and a likely El Nino impact from mid-2026. It further stated that India would find it challenging to meet its fiscal deficit target of 4.3% of GDP in FY27, primarily due to increased fuel and fertiliser subsidies, reduced excise duties on petrol and diesel, and potential monetary support needed to counter El Nino's effects on the economy.
Megha Arora, economist and director of public finance at India Ratings, noted: "A $10 per barrel increase in crude oil prices could reduce India's GDP growth by 44 basis points (100 basis points = 1 percentage point), while a 10% reduction in capital expenditure could lower GDP growth to 6%."
ICRA's Assessment
On its part, ICRA projected that India's year-on-year GDP growth likely eased to a three-quarter low of 7% in the January-March quarter of FY26, down from 7.8% in the third quarter. This moderation reflects the broader economic headwinds.
Earlier Revisions by Crisil and Moody's
Last week, Crisil estimated that in FY27, India's GDP would grow at 6.6%, substantially lower than 7.6% in FY26, attributing the slowdown to higher crude oil and other commodity prices, softer global growth amid the conflict, and forecasts of a below-normal monsoon. On May 12, Moody's had already slashed India's GDP growth forecast for 2026 to 6%, down from its earlier projection of 6.8%.
These consecutive downgrades underscore the mounting challenges for the Indian economy, which is grappling with external shocks and domestic vulnerabilities. The combination of elevated crude prices, geopolitical instability, and potential climatic disruptions poses a significant threat to growth momentum and fiscal consolidation.
