India Growth to Ease to 7.1% in FY27; Inflation Seen Rising: Crisil Report

India’s gross domestic product (GDP) is projected to moderate to 7.1% in FY27, compared with 7.6% last year, ratings agency Crisil said on Wednesday.

The outlook by the ratings agency noted that domestic demand continues to be supported by fiscal measures such as income tax cuts, rationalisation of goods and services tax (GST) rates, higher direct benefit transfers and adequate liquidity lowering borrowing costs.

“Domestic demand is expected to stay supportive in fiscal 2027, with fiscal measures lifting disposable incomes and private investment seeing a mild pick-up,” Dharmakriti Joshi, chief economist at Crisil, said.

“That said, risks remain tilted to the downside, given renewed geopolitical flare-ups and lingering trade-related uncertainty that can transmit through commodity prices, trade and capital flows.”

Further, export momentum is expected to sustain in FY27, supported by steady global demand, robust services exports and trade opportunities expected to emerge from recently signed trade agreements. India signed a free trade agreement with the European Union last year, along with agreements with Germany and France. Other trade deals signed by India include agreements with Washington, New Zealand, Oman, the UAE and Russia. Broader bilateral agreement talks are also being held with the US, Chile and other South American nations.

“Exports are expected to double to ~Rs 80 lakh crore by fiscal 2031. This remains critical, given India’s modest share in incremental global exports over the past decade, reinforcing the strategic case for a deeper manufacturing base,” Crisil said in its report.

However, it warned that geopolitical and trade uncertainty, and its impact on global commodity prices, warrants constant policy recalibration, along with “consistency, competitiveness, reforms and private sector balance sheet strength to sustain the capex upcycle.”

Inflation To Heat Up

Crisil has projected retail inflation to rise to 4.3% on average in FY27, from an estimated 2.5% in FY26.

The report said food prices are expected to remain benign and food inflation to normalise from its current lows.

“Within the non-food category, Brent crude oil prices are expected to be higher in fiscal 2027, estimated at $75–80 per barrel, while in the base case, precious metals inflation is expected to slow,” the report said.

Based on the revised consumer price index (CPI), India’s retail inflation stood at 2.75% in January. According to a poll by Mint, inflation is expected to rise to 3.1% in February.