Why S&P, Fitch and Moody’s have all upgraded India’s FY27 growth outlook

India’s stronger-than-expected economic performance in the June quarter has prompted the three major global rating agencies to raise their growth forecasts for the country, with S&P Global Ratings and Moody’s Ratings now projecting 7% growth for FY27 and Fitch Ratings placing its forecast at 6.9%.

The revisions mark a significant reassessment of India’s growth outlook. The economy expanded 7.8% in the June quarter, demonstrating resilience despite geopolitical tensions, external shocks and uneven global growth.

S&P, in its Economic Outlook Asia-Pacific Q4 2026: Exports, Domestic Demand Will Shore Up Growth, said robust industrial activity, healthy consumption, strong exports of goods and accelerating government investment had contributed to growth exceeding its earlier expectations.

The agency consequently raised its FY27 GDP forecast to 7% from 6.6%.

Fitch similarly pointed to the economy’s resilience, saying the 7.8% June-quarter growth showed that India had absorbed the impact of the US-Iran conflict and the deterioration in its terms of trade during the first half of 2026.

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The agency also sees stronger private investment prospects. It expects investment to rise by more than 10% this fiscal year, while non-food credit growth reached 19% year-on-year in July.

Moody’s, meanwhile, raised its FY27 real GDP growth forecast to 7% from 6%, citing India’s resilience amid the Middle East conflict.

Why the outlook is not entirely upbeat

Despite the upgrades, the agencies expect economic momentum to moderate during the second half of FY27.

S&P said the boost from GST rationalisation and income-tax cuts would gradually fade. It also flagged weather-related risks, noting that cumulative rainfall was 15% below normal through September 9. Agricultural output and food inflation therefore remain important variables for the growth outlook.

Fitch also expects slower expansion in manufacturing and services, based on purchasing managers’ index data. Below-normal monsoon rainfall could weigh on agriculture and rural demand, while higher inflation could constrain real incomes and consumption.

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Growth upgrade, but rates could rise

The agencies' forecasts also point to a potential shift in the monetary-policy environment.

S&P expects consumer inflation to average 5.1% in FY27 and sees the Reserve Bank of India raising its policy rate by 25 basis points to 5.5%.

Fitch expects a 25-basis-point increase in October to 5.5%, followed by another 25-basis-point hike in early 2027 to 5.75%, before rates ease back to 5.5% in 2028.

The contrasting signals—higher growth forecasts alongside expectations of tighter monetary policy—suggest that the next phase of India's expansion could depend increasingly on how the economy manages inflation, weather risks and geopolitical shocks while sustaining domestic demand and investment.

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