Economists Expect Q4 Growth at 7.4%, FY27 Growth Forecast Slows to 6.6%

India's Economic Growth Expected to Slow Below 7 Percent in FY27

India's economic growth is likely to slow below 7 percent in FY27 due to elevated oil prices, geopolitical tensions, and inflationary pressures, according to a Moneycontrol poll of 14 economists. The economists expect GDP growth to moderate to 6.6 percent in FY27, a full percentage point lower than the projected 7.6 percent growth in FY26.

The median forecast is slightly above the International Monetary Fund's (IMF) projection of 6.5 percent, but broadly in line with the World Bank estimate of 6.6 percent. For the January-March quarter of FY26, economists expect GDP growth of 7.4 percent compared with 7.8 percent in the previous quarter, suggesting the economy remained relatively resilient before the full effects of the West Asia conflict and higher crude prices filtered through.

Key Indicators:

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The government has announced that it will release Q4FY26 and full year provisional estimates on June 5, a week later than the previous year. This change is intended to improve data quality.

Economists have pointed out that GDP growth has held up despite the West Asia crisis in March 2026, with strong growth seen in listed company performance and margins showing no impact of rise in input costs. However, they warn that elevated energy prices, supply disruptions, and weather-related risks could simultaneously weaken consumption and push inflation higher.

The government has raised the price of petrol by another 90 paise, instituting three hikes in 10 days. Petrol prices in the national capital have now increased by nearly five rupees this month.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Several economists have identified the ongoing West Asia conflict as the biggest risk to India's outlook. Rajani Sinha, chief economist at CareEdge Ratings, said that if crude oil averages $90 per barrel through FY27, India's GDP growth could slow to 6.7%, while an extreme scenario of $120 per barrel oil could drag growth below 6%.

India's crude basket has averaged $107.96 in May compared with $114.48 in April. Aditi Nayar, chief economist at ICRA, said that the agency has raised its FY27 crude oil assumption to $95 per barrel from $85 earlier because of persistent tensions in West Asia. ICRA has correspondingly lowered its FY27 growth forecast to 6.2% from 6.5%.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, warned that inflation risks are building from "higher input prices, energy costs, and weakening INR," while El Niño-related supply shocks could further cloud the outlook.

Most economists do not expect an immediate policy response from the Reserve Bank of India (RBI) in June, with only one economist in the poll expecting a rate hike in the upcoming policy meeting. The median expectation places the repo rate at 5.75 percent by the end of FY27.

However, expectations of tightening increase later in the year. The median probability of a rate hike rises from 7.5 percent in June to 22.5 percent in August and 60 percent by October, reflecting growing concerns about inflation persistence. A significant reason is hardening inflation expectations, with economists now expecting median CPI inflation at 4.9 percent in FY27, much above RBI's medium-term target of 4 percent.