India’s GDP growth is projected to slow down to 6.5% in FY2027 due to high crude oil prices and concerns over energy availability, as per a report by ICRA. The report also forecasts a rise in CPI inflation to 4.3% in FY27 from 2.1% in FY26. The RBI Monetary Policy Committee is expected to maintain policy rates unchanged for an extended period despite the economic slowdown.
The Reserve Bank of India is likely to continue managing liquidity conditions to provide support to the financial system. The report highlights that recent high-frequency indicators displayed positive trends before geopolitical tensions emerged. However, uncertainties in West Asia could impact India’s macroeconomic outlook in the short term, especially considering the country’s reliance on imported crude oil, natural gas, and fertilizers.
A sustained surge in energy prices might result in increased input costs, potentially affecting corporate profitability and growth, according to the report. The ratings agency anticipates the current account deficit to expand to about 1.7% of GDP in FY27 from 1.0% in FY26, assuming an average crude oil price of $85 per barrel. It estimates that a $10 per barrel increase in crude oil prices could elevate the CAD by 30–40 basis points.
Consumer spending trends have been buoyed by factors like GST rate adjustments and festive demand. The report suggests that while overall consumption remains stable, discretionary spending patterns warrant monitoring. The government’s continued emphasis on capital expenditure is expected to bolster investment activity, with the FY27 Budget allocating more funds for capex. Private sector investments, however, may be influenced by global factors and cost conditions in the near future.
