Rating Agency Forecasts 6.4% Economic Growth for FY2027 Amid Energy‑Related Inflation Pressures

New Delhi – On Tuesday, the global rating agency reaffirmed India’s long‑term issuer default rating at BBB‑ with a stable outlook and kept the short‑term rating at F3. The agency cited the country’s strong development outlook and a solid external financing base as the rationale for the rating stance.

In its commentary, the agency emphasised that the country’s ability to preserve broad‑based economic stability and enhance policy credibility will continue to drive robust expansion, even as it navigates short‑term challenges stemming from the current energy crisis.

The agency projects GDP growth of 6.4 percent for the fiscal year ending March 2027. While this figure falls short of the three‑year average of 7.4 percent, it outpaces the 2.0 percent average growth of other BBB‑ rated economies by more than three times.

The Indian economy’s demonstrated resilience to recent shocks, the agency noted, is expected to endure. Though tensions linked to the United States‑Iran situation pose a risk because India is a net importer of energy, the agency does not foresee a lasting negative impact on growth.

Energy‑driven inflation is expected to raise the average consumer price index to 4.1 percent in FY27, up from 2.1 percent in FY26, but the agency believes inflation will stay within the Reserve Bank’s 2‑6 percent tolerance corridor. Core inflation is projected to stabilise near the 4 percent mark.

Fiscal measures have mitigated the inflationary fallout of the energy shock, easing pressure on the central bank. The agency also anticipates that, to counter the second wave of the energy crisis and El Niño‑related risks, the Reserve Bank may lift its policy rate by 25 basis points toward the end of the year, potentially reaching 5.5 percent.