S&P Global Ratings has raised its forecast for India’s real GDP growth in FY27 to 7 per cent from 6.6 per cent earlier.
The ratings agency cited stronger-than-expected industrial activity, consumption, exports and government investment as the key reasons behind the upgrade.
The revision comes after India’s economy expanded 7.8 per cent year-on-year in the April-June 2026 quarter.
Growth had slowed from 8.6 per cent in the previous quarter. However, S&P said the pace remained strong. It also helped support economic momentum across emerging Asia.
“Several factors drove growth to higher levels than we expected in the June quarter,” S&P Global Ratings said in its latest Asia-Pacific Economic Outlook.
The agency said robust industrial activity was one of the key drivers of the stronger-than-expected performance. Healthy consumption also supported growth.
Strong goods exports and faster government investment added to the momentum.
Based on these factors, S&P raised its FY27 growth forecast by 40 basis points.
India growth outlook
S&P expects the Indian economy to maintain a strong growth pace beyond FY27.
It has projected GDP growth of 7.2 per cent for FY28. It expects growth to be 7 per cent in FY29.
The FY27 forecast is 0.4 percentage point higher than its earlier estimate. The forecasts for FY28 and FY29 have not changed.
However, the agency expects growth to moderate in the second half of FY27.
One reason is the fading impact of some recent policy measures. S&P expects part of the support from GST rationalisation and income-tax cuts to weaken as the year progresses.
The agency has also flagged weather conditions as a downside risk.
S&P said cumulative rainfall was 15 per cent below normal as of September 9. This could have implications for agricultural output.
Farm output will also be important for food inflation in the coming months.
A weaker agricultural performance or higher food prices could affect overall domestic demand and inflation trends.
RBI rate hike expected
Despite raising its growth forecast, S&P expects inflationary pressures to build.
The agency expects the Reserve Bank of India (RBI) to raise its policy rate by 25 basis points during FY27.
S&P expects the policy rate to reach 5.5 per cent by the end of FY27. The rate is currently projected at 5.25 per cent for FY26.
The agency expects the policy rate to remain at 5.5 per cent through FY29.
It then expects the rate to fall to 5.25 per cent in FY30.
S&P has also raised concerns about the inflation outlook.
It expects consumer inflation to average 5.1 per cent in FY27.
Inflation is expected to moderate in the following years. S&P projects average inflation at 4.7 per cent in FY28 and 4.3 per cent in FY29.
The inflation outlook will remain closely linked to food prices, weather conditions and domestic demand.
Domestic demand remains strong
India is among the economies where domestic demand has remained resilient, according to S&P.
Consumption growth was particularly strong in India, Indonesia, Malaysia and Taiwan.
This points to continued strength in household spending despite changes in the broader global environment.
Investment activity has also remained strong in India.
S&P said investment momentum was strong in India, along with Australia, Indonesia, Singapore, Taiwan and Thailand.
Government investment has been an important part of the growth story.
The ratings agency specifically pointed to accelerating government investment as one of the factors that helped the Indian economy perform better than expected in the June quarter.
Exports support growth
Exports have also provided support to India’s growth.
S&P highlighted the recent performance of Indian exports. It said exports across the Asia-Pacific region continued to benefit from resilient global demand.
Strong goods exports were among the factors that helped push India’s June-quarter growth above the agency’s earlier expectations.
The export outlook, however, will remain linked to global demand and external economic conditions.
Asia-Pacific growth outlook
S&P has also revised its growth forecast for the wider Asia-Pacific region.
The ratings agency raised its 2026 growth forecast for the region by 20 basis points to 4.6 per cent.
Its 2027 growth forecast remains unchanged at 4.4 per cent.
S&P said resilient global demand has continued to support exports across the region.
For India, the latest forecast points to continued strong economic growth. At the same time, the agency expects the pace to moderate later in FY27.
