India's Economic Growth To Slow To 6.8% In FY27 Amid West Asia Crisis, El Nino Impact

India Ratings & Research on Tuesday projected India's GDP growth to slow down to 6.8% in the current fiscal year, as against 7.6% in the previous year, citing risks from fuel and food inflation stemming from West Asia conflict's uncertainty, weak currency, and the likely impact of El Niño on agriculture.

The FY27 GDP growth projection at 6.8% is a tad higher than the 6.7% growth Ind-Ra had projected in May.

Earlier this month, the Reserve Bank of India (RBI) had raised growth projections from 6.6% to 6.7% citing resilient domestic economy.

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 ₹93.98 (May 2026: ₹94.28), a depreciation of 6.4% YoY, in FY27.

Fitch Group subsidiary Ind-Ra estimates capital flows of $70 billion under foreign currency non-resident (bank) (FCNR B) and external commercial borrowings (ECBs).

The slowdown in GDP growth in FY27 vis-a-vis FY26 is attributed to higher fuel and food inflation stemming from the West Asia conflict's uncertainty, weak currency, and the likely impact of El Niño on agriculture, Ind-Ra said in a statement.

The agency has forecast quarterly GDP growth at 6.9, 6.6, 6.7, and 6.9% for April-June, July-September, October-December, and January-March as against the RBI's prediction of 7, 6.4, 6.5, and 6.8, respectively.

Ind-Ra Chief Economist and Head - Public Finance Devendra Pant 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.

"Our crude oil price assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Niño may limit growth upside from lower oil prices," Pant said.

Ind-Ra estimates retail inflation to average 4.9% in the current fiscal year, compared to 2% in FY26. Current account deficit is estimated to rise to 1.5% of GDP, from 0.6% in FY26.

The FY27 deficit target of 4.3% 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, Pant said.