Moody's Ratings on Friday revised upward its forecast for India's real economic growth in fiscal 2026-27 to 7% from an earlier 6%, citing stronger private consumption, ongoing infrastructure investment and a resilient services sector despite global shocks.
In a periodic review of India's sovereign rating, Moody's noted that India's year-on-year real gross domestic product expanded 8.2% in the first six months of calendar 2026, accelerating from 7.3% growth recorded in 2025. The ratings agency said that performance underpinned its more optimistic growth projection for the fiscal year.
Moody's also said India's expansion has shown resilience to the economic shock stemming from the conflict in the Middle East and that it expects the country to grow faster than other Group of 20 economies and similarly rated emerging-market sovereigns.
While raising its growth forecast, Moody's left India's long-term issuer rating at Baa3 and maintained a stable outlook. The agency described the rating as a balance between the country's large, diversified economy and high growth potential on one hand, and high government debt, weak debt affordability and low per-capita income on the other.
Moody's highlighted risks linked to the geopolitical shock in the Middle East, cautioning that a prolonged conflict could keep energy prices elevated and push inflation above its 4.8% forecast for fiscal 2026-27. The agency further noted that higher energy and fertiliser import bills could widen India's current account deficit.
On the fiscal front, Moody's said the government remains committed to reducing the central government fiscal deficit to 4.3% of GDP in fiscal 2026-27 from 4.4% in the prior year. However, it added that increased defence and infrastructure expenditures could constrain the pace of fiscal consolidation.
Implications for markets and sectors: The revisions and commentary touch on sectors including services and infrastructure, which Moody's identified as growth drivers, and on energy and agriculture inputs, which face near-term cost pressures tied to international developments.