Citing risks from fuel and food inflation stemming from West Asia conflict's uncertainty, weak currency, and the likely impact of El Nino on agriculture, India Ratings & Research (Ind-Ra) has projected India's Gross Domestic Product (GDP) growth to slow down to 6.8 per cent in the current fiscal year (FY27), as against 7.6 per cent in the previous year. Though, the growth projection is tad higher than the 6.7 per cent growth Ind-Ra had projected in May. The agency has forecast quarterly GDP growth at 6.9 per cent, 6.6 per cent, 6.7 per cent, and 6.9 per cent for April-June (Q1), July-September (Q2), October-December (Q3), and January-March (Q4), respectively.
The domestic rating agency said it now estimates average crude oil price at $85/bbl in FY27 compared to $95/bbl in May 2026. It expects rupee-dollar exchange rate to average Rs 93.98 in FY27 (May 2026: Rs 94.28), a depreciation of 6.4 per cent YoY. It estimates capital flows of $70 billion under foreign currency non-resident (bank) (FCNR B) and external commercial borrowings (ECBs). Ind-Ra said crude oil price of the Indian basket averaged $101.31/bbl in the June quarter of FY27 and $96.49/bbl for April-July 2026. It noted that lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Nino may limit growth upside from lower oil prices.
The agency estimates retail inflation to average 4.9 per cent in FY27, compared to 2 per cent in FY26. Current account deficit is estimated to rise to 1.5 per cent of GDP, from 0.6 per cent in FY26. The FY27 deficit target of 4.3 per cent remains challenging due to subsidies on liquefied petroleum gas and fertilisers. While direct tax collection and non-tax revenue may support achieving the fiscal deficit target, indirect tax collection may pose challenging.
