S&P Raises India's FY27 GDP Growth Forecast To 7%, Sees 25 Bps RBI Rate Hike

S&P Global Ratings on Wednesday raised India's GDP growth projections for the current fiscal to 7%, citing robust economic activity and forecasting that the RBI could hike interest rates by 25 basis points in FY27.

In its Economic Activity for Asia Pacific report, S&P estimates consumer inflation to average 5.1% in FY27.

The Indian economy grew higher than expected at 7.8% in the June quarter. S&P said factors like robust industrial activity, healthy consumption, strong goods exports, and accelerating government investment have driven the growth.

"We have consequently upgraded our GDP growth forecast for the current fiscal year, ending March 31, 2027, to 7%, from 6.6% previously," S&P said, adding growth could ease in the second half of the fiscal year as the tailwinds from General Sales Tax rationalisation and income tax cuts diminish.

Weather-related risks warrant close monitoring. Cumulative rainfall was 15% below normal till September 9, 2026, in the current monsoon season. Agricultural output and food inflation therefore remain key variables to watch, it said.

"We expect the balance of considerations to shift toward higher interest rates. Factors supporting this shift include solid growth, persistent inflationary pressures, an unresolved conflict in West Asia, and weather-related risks. We expect consumer inflation to average 5.1% and the Reserve Bank of India to raise its policy rate by 25 bps in the current fiscal year," S&P added.

Last week, another global rating agency, Moody's too, had raised India's GDP growth forecast for the fiscal to 7% -- the fastest growth rate among all G20 economies.

The 7% FY27 GDP growth estimate compares with 6.7% projected by the RBI and 6.4% by Fitch Ratings.

The Indian economy grew at 7.8% in the previous fiscal (2025-26).