India's growth forecast cut to 6.8% as geopolitical risks mount

India Ratings & Research on Tuesday trimmed its growth forecast for FY27 to 6.8 per cent, citing mounting external headwinds and domestic challenges that threaten to cool the economy's expansion trajectory. The projection marks a marginal upward revision from the agency's May estimate of 6.7 per cent, but represents a notable slowdown from the 7.6 per cent growth recorded in the previous fiscal year.

The rating agency attributed the moderated outlook to multiple risk factors, including elevated crude oil prices stemming from uncertainty in West Asia, potential food price inflation, and the anticipated impact of El Nino weather patterns on agricultural output. These pressures are expected to test India's inflation management even as the domestic economy maintains underlying resilience.

India Ratings has revised downward its crude oil price assumptions for FY27, now estimating an average of USD 85 per barrel compared to USD 95 per barrel projected in May. The agency also expects the rupee to depreciate to an average of Rs 93.98 against the dollar, representing a 6.4 per cent year-on-year decline from May's estimate of Rs 94.28.

The forecast comes slightly above the Reserve Bank of India's own projection of 6.7 per cent growth announced earlier this month, when the central bank cited resilience in domestic economic activity as justification for its upward revision from an earlier 6.6 per cent estimate. India Ratings estimates foreign currency inflows of USD 70 billion under the FCNR(B) deposit scheme for the fiscal year, providing some cushion against external pressures on the currency front.