India's GDP growth is projected to decelerate to 6.8% for the fiscal year 2027, down from 7.6% in the previous year, according to a report released by India Ratings & Research on August 18,2026. The agency cited several factors contributing to this slowdown,including ongoing uncertainties from the conflict in West Asia,rising fuel and food inflation,and the anticipated effects of El Niño on agricultural output.
This forecast slightly exceeds the earlier estimate of 6.7% made by agency in May. Reserve Bank of India (RBI) had recently adjusted its growth projections upward from 6.6% to 6.7%,attributing this increase to resilient domestic economy .
In its latest analysis,India Ratings has set average crude oil price at $85 per barrel for FY27,a decrease from the previous estimate of $95 per barrel made in May 2026. The depreciation of the Indian rupee is also concern, with expectations that the exchange rate will average ₹93.98 compared to ₹94.28 in the earlier forecast, reflecting a year-on-year depreciation of 6.4%.
Foreign capital inflows are estimated at $70 billion,primarily through foreign currency non-resident bank deposits and external commercial borrowings. However, the agency warns that the anticipated slowdown in GDP growth is largely a result of higher inflation rates driven by geopolitical tensions and adverse weather conditions.
Quarterly growth projections for FY27 are set at 6.9%,6.6%,6.7%,and 6.9% for the periods from April to March,respectively. This contrasts with the RBI's forecasts of 7%, 6.4%,6.5%, and 6.8% for the same quarters .
“Our crude oil price assumption for FY27 is USD85/bbl . Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Niño may limit growth upside from lower oil prices,” said Devendra Pant,Chief Economist and Head of Public Finance at India Ratings.
Retail inflation is expected to average 4.9% in FY27,a significant rise from 2% in FY26. current account deficit is projected to increase to 1.5% of GDP,up from 0.6% in the previous fiscal year. The fiscal deficit target for FY27 remains ambitious at 4.3%,particularly due to ongoing subsidies for liquefied petroleum gas and fertilizers.
While direct tax collection and non-tax revenue may help in meeting the fiscal deficit target,challenges remain in indirect tax collection,according to Pant. economic landscape for India in FY27 appears complex,with multiple external and internal factors at play.
