Fitch Ratings has lowered India’s GDP growth projection for the current fiscal year to 6.4 per cent from the earlier estimate of 6.7 per cent. It said the US-Iran war will slow the economy in the September and December quarters.
The rating agency expected economic growth to slow in FY27 from the 7.4 per cent clocked in the Financial Year 2026 as rising prices erode real incomes and dampen consumer spending, despite resilient capital expenditure. “We expect GDP growth to ease to 6.4 per cent in FY27, a downward revision of 0.3pp from March. Domestic demand will be the main driver of growth, but lower imports in real terms imply positive contributions to growth from net external demand,” it said in its June Global Economic Outlook.
Fitch further said that the economy’s slowdown will be most apparent in the second and third quarters of FY27, as rising prices due to the US-Iran war erode real incomes and dampen consumer spending. Fuel prices have both risen by 4-5 per cent in recent weeks. “The oil price shock is hitting world growth prospects and increasing downside risks. But we are also amid a very pronounced boom in global IT spending, which is cushioning the near-term impact on activity in the near term, particularly in Asia,” said Fitch Chief Economist Brian Coulton.
For FY28, Fitch expects GDP growth to pick up as the energy shock unwinds, with stronger consumer spending and investment translating to a 6.7 per cent growth rate for the full financial year, before easing towards a trend growth of 6.4 per cent in FY29.
Fitch has revised its 2026 average price assumption for Brent crude oil to $87 per barrel (bbl), up from the $70/bbl estimated in March.
It further said India’s consumer price inflation has not yet risen significantly, but price pressures are mounting; wholesale prices rose by 8.3 per cent y/y in April and CPI inflation to 3.5 per cent.
Fitch expected inflation to rise steadily over the coming months, reaching 5.3 per cent by the end of the (calendar) year. This reflects a combination of base effects and higher energy prices. Forecasts for below-average monsoon rains and the current heatwave in parts of India raise the risk of even stronger price rises.