Rating agencies trim growth forecasts amid West Asia crisis

MUMBAI: Leading rating agencies have revised downward India's GDP growth estimates for the next few quarters and up to 2027, thanks to the impact of the war in West Asia on the economy.

After global ratings major Moody's and domestic major Crisil's revisions last week, on Tuesday ICRA, the local arm of Moody's, and India Ratings & Research, the domestic arm of global major Fitch, cut India's GDP growth forecasts.

India Ratings expects India's GDP to grow at 6.7% in FY27, down from 7.6% in FY26 and below RBI's 6.9%. It said the Indian economy faces risks from high crude prices, geopolitical tensions in West Asia, and a likely El Nino impact from mid-2026. The agency said that India would find it difficult to meet its fiscal deficit target of 4.3% of GDP in FY27, mainly because of fuel and fertiliser subsidies, reduced excise duties on petrol and diesel prices, and likely monetary supports to counter El Nino's impact on the economy.

"A $10 per barrel increase in crude oil prices could reduce (India's) GDP growth by 44 basis points (100 basis points = 1 percentage point), while a 10% reduction in capex could lower GDP growth to 6%", said Megha Arora, economist and director, public finance, Ind-Ra.

On its part, ICRA projected that India's year-on-year GDP growth to have eased to a three-quarter low of 7% in the Jan-March quarter of FY26, from 7.8% in Q3.

Last week, Crisil estimated that in FY27, India's GDP to grow at 6.6%, substantially lower than 7.6% in FY26, "because of higher crude oil and other commodity prices, softer global growth amid the conflict and forecasts of a below-normal monsoon."

On May 12, Moody's slashed India's GDP growth forecast for 2026 to 6%, from 6.8% it had projected earlier.


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