S&P Forecasts India’s GDP Growth at 6.6% in FY27 Amid Energy Stress and Weak Monsoon Concerns

Global Financial Rating Agency S&P Global Ratings has projected the India’s growth for the FY27 and it projected to slow down around 6.6% in FY27 and it compared with the 7.7% in the FY26. Rating agency has cited the continuous energy market disruptions, rising fuel costs and expectations around below normal monsoon are the key factors contributing to this outlook.

What Has S&P Forecast for India’s Economy?

The report titled, Economic Outlook Asia-Pacific Report of Q3 2026: AI-Exposed Markets To Outperform, The S&P Global Ratings has projected that India’s economic growth will moderate in the year FY27.

Growth Projections

• FY26: 7.7%
• FY27: 6.6%
• FY28: 7.2%
• FY29: 7.0%

Notably, S&P’s FY27 growth estimate also aligns with the forecast of the Reserve Bank of India.

Why Does S&P Expect Growth to Slow?

The ratings agency has identified the two major risks affecting India’s economic outlook.

Energy Stress

Energy prices remain vulnerable despite the some easing in global crude oil markets. Although the

Although an interim peace arrangement between the United States and Iran has also reduced the immediate supply concerns and disruptions to the energy infrastructure in West Asia continue to create uncertainty.

Weak Monsoon Forecast

Another major concern for the outlook is the southwest monsoon of 2026.

The India Meteorological Department has projected the rainfall at around 90% of the Long Period Average (LPA) which indicates the below-normal monsoon.

The weaker rainfall outlook is also linked to the expected influence of the El Niño conditions.

How Could Energy Stress Affect Inflation?

S&P expects that the rising energy prices to push inflation higher during FY27.

For the FY26 average inflation will be around 2% and for the FY27 will be around 5.1%

The agency also believes the manufacturers may pass higher input and transportation costs to consumers.

Recent increases in the prices, including the,

• Petrol
• Diesel
• Cooking gas

could further contribute to the inflationary pressures.

Why Is Inflation a Concern for Policymakers?

Inflation remains as one of the most closely monitored economic indicators because it affects the both households and businesses.

Impact on Consumers

Rising prices increase the cost of,

• Food
• Fuel
• Transportation
• Essential goods and services

Impact on Businesses

Companies may faces the,

• Higher production costs
• Lower profit margins
• Reduced consumer demand

Managing inflation is therefore is crucial for the sustaining economic growth and financial stability.

RBI May Consider Interest Rate Action

The projected rise in the inflation could influence the monetary policy decisions.

S&P also expects that the Reserve Bank of India to raise the repo rate by 25 basis points during the second half of the FY27.

Repo Rate Outlook Projections by RBI

• FY27: 5.50%
• FY28: 5.50%
• FY29: 5.50%
• FY30: 5.25%