Moody’s Cuts India GDP Forecast To 6% Amid Global Tensions
Global ratings agency Moody's Ratings has lowered India’s economic growth projection for FY27 to 6 percent, down from its earlier estimate of 6.8 percent, citing rising geopolitical risks and external pressures.
The downgrade comes as concerns grow over the impact of ongoing tensions in West Asia, a region crucial to India’s energy security and trade stability.
Moody’s highlighted that India’s strong dependence on West Asia for oil and gas imports makes it vulnerable to disruptions. A large share of the country’s crude oil and LPG supply originates from this region, meaning any conflict or instability can directly affect domestic supply chains and pricing.
According to the agency, supply disruptions could lead to fuel shortages and push up energy costs. This would increase transportation expenses and eventually raise the prices of essential goods, including food items. The situation may worsen further due to India’s reliance on imported fertilisers, which are closely linked to global energy prices.
While inflation has remained relatively moderate so far, Moody’s expects it to rise in the coming fiscal year. It has projected inflation to increase to 4.8 percent in FY27 compared to 2.4 percent in FY26, indicating growing pressure on household budgets.
The report also pointed to the broader economic impact of rising costs. As expenses increase, consumer spending is likely to weaken, affecting demand across sectors. At the same time, businesses may delay or scale back investments due to uncertainty and higher input costs. This combination could slow industrial activity and reduce momentum in infrastructure development.
On the policy front, the outlook suggests that interest rates may remain elevated for longer than expected. With inflation risks building up, policymakers may avoid aggressive rate cuts and could even consider tightening if price pressures intensify.
Other economic institutions have echoed similar caution. The Organisation for Economic Co-operation and Development has projected India’s growth at 6.1 percent, while domestic agency ICRA Limited estimates it at 6.5 percent, reflecting a broader consensus of moderation in growth expectations.
The report also flagged fiscal and external risks. Rising fuel prices could increase government spending on subsidies, while slower consumption may affect tax revenues. This combination could challenge the government’s efforts to control the fiscal deficit.
Additionally, higher import bills, especially for energy and raw materials, may widen the current account deficit, putting further pressure on the economy.
Overall, Moody’s assessment signals a cautious outlook for India’s growth trajectory, with global uncertainties and domestic cost pressures likely to shape the economic landscape in FY27.
