India GDP Growth To Slow To 6.6% In FY27: BMI

Fitch Group Unit Expects Economic Growth To Moderate Despite Remaining Above Decade Average

India’s economic growth is expected to moderate in FY27 as rising inflation, softer consumer spending, and global geopolitical risks weigh on the country’s growth momentum, according to BMI, a Fitch Solutions company.

BMI has projected India’s GDP growth at 6.6% for FY27, lower than the 7.7% growth recorded in FY26. However, the forecast remains above India’s average annual growth rate of 6.1% over the past decade and aligns with the Reserve Bank of India’s (RBI) growth estimate for the current fiscal year.

The projection comes after official data showed that India’s economy expanded 7.7% in FY26, up from 7.1% in FY25, supported by strong domestic consumption and robust investment activity.

Why Does BMI Expect Slower Growth In FY27?

According to BMI, the slowdown is likely to be driven by three key factors.

First, the positive impact of the Goods and Services Tax (GST) reforms introduced in September 2025 is expected to fade. The reforms triggered a consumption-led boost during the December quarter of FY26, but consumer spending momentum weakened in the March quarter, with consumption growth slowing by 1.1 percentage points to 7.1% year-on-year.

Second, rising inflation is expected to pressure household spending. BMI forecasts inflation to reach 5.3% in FY27, partly due to disruptions linked to geopolitical tensions in West Asia and concerns surrounding the Strait of Hormuz, a critical global oil transit route.

Third, investment growth is expected to moderate as businesses become more cautious amid global uncertainty and slower demand conditions.

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Rupee Depreciation Could Support Exports

BMI expects the Indian rupee to trade around 95.1 against the US dollar during the calendar year.

While a weaker rupee may increase import costs, it could also improve the competitiveness of Indian exports in global markets. According to BMI, this depreciation may partially offset the economic impact of higher energy costs resulting from tensions involving Iran and disruptions in global oil markets.

The report noted that export growth could provide a cushion against some of the external shocks affecting the broader economy.

RBI Rate Cuts To Continue Supporting Growth

Despite forecasting slower growth, BMI believes India’s economy will continue to benefit from the Reserve Bank of India’s accommodative monetary policy stance.

The central bank reduced interest rates by a cumulative 125 basis points during 2025, and BMI expects those lower borrowing costs to continue supporting economic activity through FY27.

The report added that any potential rate hikes expected in the future would likely have a more meaningful impact on growth during FY28 rather than the current fiscal year.

India Still Expected To Outperform Major Economies

Although growth is projected to slow from last year’s pace, India is expected to remain one of the fastest-growing major economies globally.

Strong domestic demand, improving export competitiveness, supportive monetary policy, and ongoing infrastructure investments are likely to help the country maintain healthy growth levels despite external headwinds.

However, economists will closely monitor inflation trends, consumer spending patterns, crude oil prices, and geopolitical developments in West Asia, as these factors are expected to play a significant role in determining India’s economic trajectory during FY27.