Moody’s Ratings on Tuesday slashed India’s GDP growth forecast for year 2026 by 0.8 percentage points to 6 per cent amid higher energy costs. The cut in growth forecast is primarily on subdued private consumption, capital formation, and industrial activity amid higher energy costs.
“The global outlook remains highly uncertain amid an increasingly prolonged confrontation and fragile ceasefire between the US and Iran, We estimate growth losses ranging from around 0.8 ppt for India,” Moody’s said.
In its Global Macro Outlook May update, Moody’s said over the next six months, the impact from higher energy prices and fuel and fertilizer-related shortages will vary widely across countries, reflecting differences in exposure and resilience.
As a net grain producer, agricultural exports will benefit in the near term from higher prices, but higher fuel and fertilizer costs would weigh on government finances, potentially constraining planned capital spending, it said. Further, Coal powers about 70 per cent of India’s electricity generation, while non-fossil sources continue to expand.
For the calendar year 2027, Moody’s slashed GDP growth estimates by 0.5 per cent to 6 per cent for India. The update reflected lingering headwinds that gradually fade as shipping flows stabilise and energy supplies improve, allowing underlying economic activity to recover.
Moody’s said India is “particularly vulnerable” to high oil prices given its heavy reliance on imported crude and LNG. India imports about 90 per cent of its energy requirements.
High energy costs would keep inflation elevated, compress profits, weaken investment and strain public finances, while major central banks remain on hold but ready to tighten financial conditions if necessary, it added.
“Our central scenario projection of 6 per cent growth in both 2026 and 2027, following 7.5 per cent growth in 2025, reflects more subdued private consumption, capital formation, and industrial activity amid tighter financial conditions and higher energy costs,” Moody’s said.