India's GDP growth to moderate to 6.9% in FY27: Ind-Ra

Domestic reforms, including the income tax cut announced in the FY26 budget, GST rationalisation and recently concluded trade agreements with Oman, the UK and New Zealand, would help cushion external headwinds, Ind-Ra said.

Consumption is expected to remain the key demand driver, with private final consumption expenditure projected to grow 7.6 per cent in FY27, supported by low inflation, improving real wages and tax relief. Investment growth is forecast at 7.8 per cent, led mainly by sustained government capital expenditure, while private capex may be uneven across sectors.

Ind-Ra noted that while US tariffs on Indian goods remain elevated, their overall impact on growth is now lower than earlier estimates. The International Monetary Fund expects global GDP growth of 3.2 per cent in 2025, marginally below previous forecasts.

Inflation is projected to stay benign, with CPI averaging 3.8 per cent in FY27, within the Reserve Bank of India’s target range. Ind-Ra expects limited further policy easing, with rate cuts unlikely to exceed 25 basis points.

On fiscal metrics, the agency expects the Union government’s debt-to-GDP ratio to decline to 55.5 per cent in FY27, while the current account deficit is projected to widen slightly to 1.5 per cent of GDP, amid higher imports and export volatility driven by US trade policies.

“Major headwinds include: i) the El Niño pattern from mid-2026, ii) a weak currency due to weak capital flows, iii) sluggish global trade growth, iv) strong growth in FY26 (base effect), and v) slower growth of net production taxes due to GST rationalisation. Another emerging headwind is artificial intelligence," said Dr. Devendra Kumar Pant, chief economist and head public finance, Ind-Ra.

ALCHEMPro News Desk (HU)