India Ratings and Research on Tuesday projected India’s GDP growth at 6.8% for fiscal 2027, citing higher fuel and food inflation from the West Asia conflict, a softer rupee, and possible El Niño effects on farming. The figure is below the 7.6% provisional estimate for FY26 but above the agency’s prior 6.7% call. The Reserve Bank of India recently lifted its own FY27 projection to 6.7% from 6.6%, highlighting domestic resilience. Downside risks listed include ongoing geopolitical tensions, elevated inflation, currency weakness, and slower government capital spending. Additional pressures could come from subdued global trade, the strong FY26 base, El Niño, and new U.S. tariffs on Russian crude imports. The forecast assumes oil at about $85 per barrel, lower than the earlier $95 assumption. Upside factors include cheaper crude, milder El Niño, and stronger capital inflows. Average Indian crude prices stood at $101.31 per barrel in the June quarter and $96.49 through July. Lower oil costs should narrow the current account deficit, though El Niño-driven inflation may offset some gains, said chief economist Devendra Pant. The 4.3% fiscal deficit target faces challenges from higher LPG and fertilizer subsidies, even as direct taxes and non-tax revenue offer support. The agency expects unchanged petrol and diesel prices, August-September rainfall at 94% of the long-term average, and a rupee averaging 93.98 to the dollar. Capital inflows are seen at $70 billion via FCNR(B) and ECB routes. Nominal GDP growth is projected at 10.4%, up from 8.9% in FY26, helped by a 3.4% GDP deflator. Quarterly real growth estimates are 6.9%, 6.6%, 6.7%, and 6.9%. For FY28, growth is expected to rise 20-50 basis points from the FY27 level. Retail inflation is seen at 4.9% and WPI at 8.5%. The government is projected to stay on a fiscal consolidation path, though subsidies and possible monetary support could complicate the 4.3% deficit goal. Policy response to West Asia tensions is likely to favor credit guarantees over direct spending. The current account deficit is forecast to widen to 1.5% of GDP from 0.6% earlier, driven by costlier energy imports and rupee depreciation.
