India Ratings & Research (Ind-Ra) has projected India’s GDP growth at 6.9% in FY27, lower than the 7.4% growth expected in FY26 (starting April 1, 2026). Growth outlook remains supported by domestic economic reforms, GST rationalisation, income-tax cuts, and key trade agreements, which are expected to act as structural growth catalysts despite global uncertainties.
Ind-Ra also highlighted an upcoming revision of base years for:
- GDP → to be revised to 2022-23 (from 2011-12)
- CPI → to be revised to 2024 (from 2012)
- Economic projections will be re-assessed after new base-year data is released.
Key Findings & Growth Drivers
- Major positive factors supporting FY27 growth include:
- GST rationalisation
- Income-tax cuts in FY26 Budget
- Three FTAs — with Oman, UK, and New Zealand
- Indo-US trade deal (reduced tariffs) expected to boost trade & GDP
- These reforms are expected to strengthen domestic demand, improve investment climate, and help India withstand external shocks, especially those arising from US tariff-related uncertainties.
Emerging Headwinds Identified by Ind-Ra
- El Niño conditions from mid-2026 → risk to agriculture & rural demand
- Weak capital flows → currency weakness risk
- Sluggish global trade growth
- Base-effect moderation after strong FY26 expansion
- Slower growth in net production taxes due to GST rationalisation
- Artificial Intelligence (AI) flagged as a new structural headwind affecting:
- Productivity transitions
- Labour market dynamics
- Technology-driven sectoral adjustments
Growth–Inflation Outlook (“Goldilocks Scenario”)
- Ind-Ra expects the economy to remain in a Goldilocks phase:
- High growth + Moderate inflation
- Retail inflation (FY27) expected to average 3.8%
- Stable agricultural growth + low inflation → likely to:
- Keep rural real wages positive
- Support consumption growth in FY27
- Urban real wages & corporate sector wages expected to rise
- Income-tax cuts & GST rationalisation (Sept 2025) → to boost disposable income & sustain consumption
Government Debt & Fiscal Position
- Union Government Debt-to-GDP
- FY26 (estimated): 56.3%
- FY27 (projected): 55.5%
- Medium-term goal: reduce to 50% in 3–4 years
- Fiscal Deficit (FY26):
- Expected at 4.4% of GDP
- Amounting to ₹15.69 lakh crore
Budget Size & Revenue Outlook
Budget Size Projection
- FY27: ₹52 lakh crore
- FY26 (Budgeted): ₹50 lakh crore
- FY26 (Revised Estimate): likely ₹49 lakh crore
Tax Revenue Shortfall (FY26): ~₹2 lakh crore
- Offset through:
- Higher non-tax revenues
- Slightly lower capital expenditure
Trade Agreements, CAD & Investment Outlook
- FTAs with New Zealand, UK, and Oman expected to:
- Boost foreign investment inflows
- Support external sector stability
- Help keep Current Account Deficit (CAD) low
- Favourable Indian Ocean Dipole + Indo-US trade deal
- May offset El Niño impact and push GDP growth higher
- Risk side:
- If consumption & investment revival weakens, GDP growth may decline
Consumption & Investment Trends
- Rural demand → resilient
- Driven by five consecutive quarters of agricultural GVA growth above 3.5%
- Decline in inflation improving rural purchasing power
- Urban demand → remains a drag
- Government Consumption Expenditure → remains muted due to fiscal consolidation
- Gross Fixed Capital Formation (GFCF) → remains strong, supported by:
- Continued public capital expenditure (Union + States)
- Rising residential housing investment
- Exports Performance (8M FY26)
- Overall exports (goods + services) ↑ 5.5% YoY
- Merchandise exports sluggish (due to US tariffs)
- Services exports strong & stable
About India Ratings and Research (Ind-Ra)
- India’s leading domestic credit rating agency
- Known for independent analysis, forward-looking credit opinions
- Coverage includes:
- Corporate issuers, banks, NBFCs, insurance firms
- Managed funds, ULBs, structured & project finance entities
- Head Office: Mumbai
- Branch Offices: Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Pune
- Regulators Recognising Ind-Ra:
- SEBI, Reserve Bank of India (RBI), National Housing Bank (NHB)
- Ownership: 100% subsidiary of Fitch Group