India’s GDP Growth Seen at 6.9% in FY27 on Strong Domestic Reforms: Ind-Ra

India’s growth story is set to remain resilient even as global headwinds intensify. India Ratings and Research (Ind-Ra) expects the economy to grow 6.9% year-on-year in FY27, building on a projected 7.4% expansion in FY26, driven largely by domestic reforms that could cushion the impact of global uncertainty, including higher US tariffs.

According to Ind-Ra, policy measures such as the income tax cut announced in the FY26 Budget, GST rationalisation, and new trade agreements with Oman, the UK and New Zealand are likely to act as key growth catalysts. These reforms, the agency said, should help offset challenges from a slowing global economy and volatile capital flows.

However, risks remain. Ind-Ra flagged potential disruptions from a mid-2026 El Niño, currency weakness, slower global trade, and the base effect of strong FY26 growth. Emerging technologies such as AI also pose structural challenges to traditional growth drivers, said Devendra Kumar Pant, Chief Economist at Ind-Ra. That said, a swift Indo-US trade deal or favourable Indian Ocean Dipole conditions could push growth beyond current estimates.

At the heart of India’s growth engine is consumption.

Private Final Consumption Expenditure (PFCE)—which accounts for nearly 56% of GDP—has shown steady momentum, growing 7.2% in FY25 and 7.5% in the first half of FY26. While rural demand remains robust, urban consumption continues to lag. Still, falling inflation, five consecutive quarters of agricultural GVA growth above 3.5%, and positive real wage growth are expected to support sustained consumption in FY27.

PFCE is projected to expand 7.6% in FY27, supported by strong services growth, tax relief, GST rationalisation and stable food inflation. Government consumption, however, is expected to stay muted as fiscal consolidation remains a priority.

Investment activity remains another pillar of support. Gross Fixed Capital Formation (GFCF), the second-largest GDP component at 34.4%, is forecast to grow 7.8% in FY27, led by government capital expenditure and residential housing demand. While capex may slow in sectors such as telecom and chemicals, others--including power, logistics and real estate--are expected to sustain momentum.

Exports face a mixed outlook. US tariff hikes have raised uncertainty, impacting Indian exports worth over $74 billion. Even so, services exports continue to perform steadily, providing a buffer against global trade weakness. Ind-Ra noted that while manufacturing activity has softened globally, India remains relatively insulated.

On inflation, the outlook remains benign. Ind-Ra expects CPI inflation to average 3.8% and WPI at 2.3% in FY27, helped by food price deflation and GST rationalisation. With inflation well within the RBI’s comfort zone, real wage growth should support both rural and urban consumption.

On the fiscal front, the agency projects the fiscal deficit at 4.1% of GDP in FY27, supported by improving debt metrics. The current account deficit may widen modestly amid trade volatility, with the rupee expected to average ₹92.26 per dollar. The RBI is likely to continue using forex interventions to smooth currency fluctuations.

Overall, Ind-Ra believes India’s reform-led domestic momentum places it in a stronger position than most emerging markets to navigate global turbulence, keeping growth on a relatively firm footing in FY27. 

(ANI and yMedia are the agency partners for this story)