Moody’s Ratings has revised India’s GDP growth forecast for fiscal year 2026-27 to 6%, down from an earlier estimate of 6.8%. The adjustment comes amid ongoing geopolitical tensions in West Asia, which are expected to moderate growth momentum and elevate inflation risks.
In its report dated March 31, Moody’s Ratings highlighted the impact of disruptions in LPG shipments from the region, which supplies over 90% of India’s LPG and 55% of its crude oil imports. These disruptions are likely to lead to household shortages and increased fuel and transport costs, with further spillovers into food inflation due to India’s reliance on imported fertilizers.
Moody’s projects inflation to average 4.8% in FY27, up from 2.4% in FY26. This upward trend is attributed to geopolitical risks that have shifted the inflation outlook. As a result, policy rates may remain steady or be increased gradually, depending on the duration and impact of these tensions on food and fuel prices.
The report also references the Organisation for Economic Cooperation and Development’s (OECD) projection of India’s GDP growth moderating to 6.1% in the current fiscal year from 7.6% in 2025-26. Domestic agency ICRA expects growth to slow to 6.5% due to elevated energy prices and concerns over energy availability.
Moody’s further notes that high oil, gas, and fertilizer prices could pressure targeted subsidies, leading to higher fiscal outlays and revenue erosion. The recent excise duty cuts on petrol and diesel are expected to negatively impact tax receipts, while high input costs could suppress household consumption and corporate profitability, affecting GST collections and corporate income tax revenues.
India’s current account deficit narrowed slightly to 0.4% of GDP in 2025, with expectations to remain around 1-1.5% for 2026 and 2027. The stable external position is attributed to a gradual increase in goods exports, although high imports of fuels and raw materials persist.
The report concludes with an outlook on India’s fiscal consolidation efforts, aiming to reduce central government debt to 50% of GDP by 2030-31 from 57% in 2024-25. However, trade disruptions in West Asia, a key market for India’s agricultural exports, and potential increases in import costs for fertilizers and gas could widen the current account deficit.
Published in SouthAsianDesk, April 6, 2026
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