Global rating agency Fitch Ratings on Tuesday downgraded India's GDP growth forecast for the financial year 2026-27 (FY27) to 6.4 per cent from its previous estimate of 6.7 per cent. The revision attributes the slowdown to the ongoing West Asia crisis and rising oil prices, which are expected to significantly impact consumer demand.
Key Highlights of Fitch's Report
In its June edition of the Global Economic Outlook, Fitch stated, 'We expect GDP growth to ease to 6.4 per cent in FY27, a downward revision of 0.3 percentage points from March.' The Indian economy is projected to slow down from the 7.4 per cent growth recorded in FY26 as inflationary pressures continue to erode household purchasing power, despite sustained strength in capital expenditure.
The report added that domestic demand will remain the primary driver of growth, though lower imports in real terms are expected to support growth through positive net external demand.
Quarterly Impact and Inflation
Fitch believes the slowdown will be most pronounced in the second and third quarters of FY27, when consumer spending is likely to decline due to higher fuel and energy costs stemming from the West Asia conflict. Fuel prices have already increased by approximately 4-5 per cent in recent weeks.
Interestingly, Fitch's report comes just days after the Reserve Bank of India (RBI) lowered its own growth projection for FY27 to 6.6 per cent and raised its inflation estimate to 5.1 per cent.
Outlook for FY28 and FY29
Beyond the current fiscal year, Fitch predicted that economic growth should rise to 6.7 per cent in FY28 as consumer spending and investment activity pick up and energy market pressures ease. Thereafter, growth is expected to moderate to 6.4 per cent in FY29, aligning more closely with its long-term trend.
Global Economic Impact
Fitch also downgraded its 2026 global economic growth forecast by 0.2 percentage points to 2.4 per cent, citing the shock to oil prices spurred by the West Asia conflict.
Brian Coulton, Chief Economist at Fitch Ratings, commented, 'The oil price shock is hitting world growth prospects and increasing downside risks. However, a pronounced boom in global IT spending is helping cushion the impact, particularly across Asia.'
