Moody’s Ratings expects India’s real GDP to expand by 6.4% in fiscal 2026–27, projecting the country to remain the fastest-growing economy in the G20. The agency links the outlook to strong domestic consumption and policy measures that support demand, while describing India’s banking system as resilient.
What Moody’s says is driving the growth
Moody’s points to consumption-led momentum and recent policy changes as key tailwinds. The report cites the rationalisation of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds, saying these steps should improve affordability and support household spending.
GST is India’s nationwide indirect tax on goods and services. “Rationalisation” typically means simplifying rates and rules to reduce friction for consumers and businesses.
Banks seen in a strong operating environment
The ratings agency says the banking system outlook remains broadly favourable, with sufficient reserves to absorb potential loan losses. It adds that the operating environment for banks should remain strong through 2026, supported by macroeconomic conditions and structural reforms.
Moody’s also expects system-wide loan growth to rise in FY27 versus FY26 year-to-date. It says corporate asset quality should stay healthy, helped by stronger balance sheets and improved profitability among large firms, while recoveries may taper after banks resolved many stressed large-corporate accounts.
RBI rates: easing only if growth visibly cools
On monetary policy, Moody’s expects the Reserve Bank of India to cut rates further in 2026–27 only if there are clear signs of slowing activity. It argues that inflation staying under control would give the central bank more flexibility.
In the first policy review of 2026, the RBI’s Monetary Policy Committee kept the repo rate unchanged at 5.25%. Several analysts read the decision as a sign of comfort on both growth and inflation dynamics, with expectations of an extended pause.
How the forecast compares with India’s own projection
Moody’s 6.4% estimate for FY27 is lower than the 6.8% to 7.2% range projected in the Finance Ministry’s Economic Survey. The survey also flags risks from the global environment even as domestic demand remains a key pillar.
Official estimates for the current fiscal year place growth at 7.4%, underscoring the slowdown implied in most forward-looking forecasts for 2026–27.
India enters FY27 with a clear split in emphasis: Moody’s leans on consumption and banking resilience, while the government’s survey targets a higher growth band but warns about external risks. The next signals to watch will be demand trends, inflation prints, and whether credit growth stays strong without a rise in stress.