Our Bureau
Mumbai
Moody’s Ratings has cut India’s GDP growth estimate for FY27 to 6 per cent from the earlier 6.8 per cent. The agency blames the ongoing West Asia conflict for slowing growth and raising inflation risks.
The conflict disrupts LPG shipments, causing household shortages, higher fuel and transport costs, and food inflation from imported fertilisers. West Asia supplies 55 per cent of India’s crude oil and over 90 per cent of LPG. Moody’s sees inflation rising to 4.8 per cent in FY27 from 2.4 per cent in FY26.
Private consumption will weaken, industrial activity will soften, and investment momentum will slow due to high prices and input costs. Policy rates may stay steady or rise in FY26-27 based on tensions’ impact on prices. India’s GDP grew robustly at 7.5 per cent in 2025, topping G-20 nations.
Higher oil, gas, and fertiliser prices will strain subsidies and boost spending. Excise duty cuts on petrol and diesel hurt tax receipts, while high costs hit consumption, profits, GST, and corporate taxes. This limits fiscal consolidation, with debt at 57 per cent of GDP in 2024-25 aiming for 50 per cent by 2030-31.
Current account deficit narrowed to 0.4 per cent of GDP in 2025 from 0.9 per cent, but may widen to 1-1.5 per cent in 2026-27. Higher import costs, trade disruptions, and risks to 40 per cent of remittances from the Gulf add pressures.
Other forecasts align: OECD at 6.1 per cent, EY warning of 1 point GDP drop and 1.5 points inflation rise if conflict lasts, and ICRA at 6.5 per cent. Government infra spending offers some support.
