Global Ratings Agency Fitch Lowers India’s FY27 Growth Forecast To 6.4%

New Delhi, June 9: India’s Gross Domestic Product (GDP) for the current financial year is likely to be 6.4%, against 6.7% expected earlier, according to global ratings agency Fitch.

Fitch lowered India’s economic growth forecast, citing higher energy prices linked to the ongoing West Asia conflict which is weighing on consumer spending and household incomes.

Fitch said it expects India’s growth to slow from the 7.4 per cent recorded in FY26, although domestic demand and capital expenditure are likely to remain the primary drivers of economic activity.

“We expect GDP growth to ease to 6.4% in FY27, a downward revision of 0.3pp from March. Domestic demand will be the main driver of growth, but lower imports in real terms imply positive contributions to growth from net external demand,” Fitch Ratings said in its June Global Economic Outlook.

It forecast GDP growth of 6.7 per cent in FY28 before moderating to 6.4 per cent in FY29, in line with its estimate of India’s long-term trend growth.

The revision comes days after the Reserve Bank of India (RBI) reduced its FY27 growth projection to 6.6 per cent while increasing its inflation forecast to 5.1 per cent.

Pressure on Consumption

Fitch said the slowdown is likely to be most pronounced during the second and third quarters of FY27 as rising fuel costs erode real incomes and dampen consumption.

Fuel prices have increased by 4-5 per cent in recent weeks, adding to inflationary pressures across the economy.

Fitch said consumer inflation in India has remained relatively contained so far, but price pressures are beginning to build.

Wholesale prices increased by 8.3 per cent year-on-year in April, while consumer price inflation rose to 3.5 per cent.

“We expect inflation to rise steadily over the months ahead, reaching 5.3% by the end of the (calendar) year. This reflects a combination of base effects and higher energy prices.

“Forecasts for below-average monsoon rains and the current heatwave in parts of India raise the risk of even stronger price rises,” Fitch said.

Rupee

On the currency front, Fitch does not anticipate a sharp depreciation of the Indian rupee during the remainder of the financial year.

“We do not expect a further, significant depreciation in the Indian rupee over the rest of the year,” Fitch said.

The ratings agency expects the rupee to average 97.50 against the US dollar during FY27.

The outlook suggests that while domestic demand and investment continue to support growth, elevated energy prices and inflationary pressures stemming from geopolitical tensions are likely to weigh on India’s economic momentum over the coming quarters.

Impact of Strait of Hormuz Closure

Fitch noted that the closure of the Strait of Hormuz has now lasted 14 weeks and is not expected to begin reopening until July.

It raised its average Brent crude oil price assumption for 2026 to USD 87 per barrel from USD 70 per barrel projected in March.

While describing the oil shock as a significant headwind to global growth, the agency noted that the current situation remains less severe than the oil crises of the 1970s.

It highlighted that real oil prices had reached USD 170 per barrel in 1979 and that oil consumption as a share of global GDP has fallen by half since 1980. (BVI)