India GDP growth seen at 6.6% in FY27 on energy stress, weak monsoon: S&P
Synopsis
S&P Global Ratings sees India's real GDP growth slowing to 6.6% in FY27 — held back not just by a weak monsoon but by a chain of global shocks: energy market stress from Middle East disruption, fertiliser-driven food inflation, a widening current account deficit, and a rupee under pressure. A policy rate hike is on the table for the second half of the year.
Key Takeaways
S&P Global Ratings forecasts India's real GDP growth at 6.6 per cent in FY27 .
Consumer inflation is projected to rise to 5.1 per cent this fiscal year, driven by higher energy costs and administered fuel price increases.
S&P anticipates a policy rate hike in the second half of the year amid a widening current account deficit and rupee weakness.
Energy stress could push inflation 0.5–0.6 percentage points higher in Q3 across India, China, and Japan.
Higher fertiliser prices pose an additional risk to food production and food inflation.
Global oil prices are expected to ease only gradually, returning to pre-crisis levels in early 2028 , per S&P's baseline.
S&P Global Ratings has projected India's real GDP growth at 6.6 per cent in FY27, citing energy market stress, a below-par monsoon outlook, and decelerating global growth as the primary headwinds. The forecast, released on Wednesday, 24 June, places India's expansion on a moderating trajectory even as the broader Asia-Pacific region shows resilience.
Inflation Outlook and Energy Pass-Through
According to the S&P Global Ratings report, consumer inflation in India is expected to climb to 5.1 per cent this fiscal year. The ratings agency attributes the uptick to manufacturers passing higher energy costs on to consumers, compounded by recent administered price increases for petrol, diesel, and cooking gas. Notably, S&P estimates that energy stress could push consumer inflation 0.5–0.6 percentage points higher in the third quarter across China, India, and Japan, with 2026 full-year average inflation running 0.3–0.4 percentage points above baseline.
Policy Rate and Rupee Under Pressure
S&P has forecast a policy rate hike in the second half of the year, flagging a widening current account deficit and a weakening rupee as key concerns. The report noted that authorities have already taken steps to encourage foreign capital inflows, which have helped stabilise the rupee against the US dollar to some degree. Whether those measures prove durable will depend heavily on the trajectory of global oil prices and the pace of domestic inflation.
Global Context: Energy Stress and AI Boom
The broader Asia-Pacific outlook, according to S&P, is being shaped by three forces: resilient global economic activity, energy market disruption, and an AI-driven technology export boom. The report credited strong AI-related investment, particularly in the United States, and accommodative financial conditions for helping the global economy withstand pressure from the Middle East conflict. However, the knock-on effects of that conflict are visible in rising input costs and lengthening supplier delivery times worldwide.
Food Prices and Fertiliser Risk
S&P flagged a specific secondary risk: sharply higher fertiliser prices weighing on food production and amplifying food price inflation. Rising inflation, the agency warned, is eroding purchasing power and depressing growth — a feedback loop that could prove particularly damaging in an economy where food carries a large weight in the consumer price index. This comes amid an already sub-par monsoon outlook, which independently threatens agricultural output.
Oil Price Baseline and 2028 Recovery
S&P's baseline scenario assumes that disruptions in the Strait of Hormuz will gradually ease in the second half of the year. Global oil prices are expected to remain elevated in the near term before easing gradually, with a return to pre-crisis levels projected only in early 2028. Until that normalisation arrives, India's import bill, current account, and inflation trajectory remain exposed to external shocks beyond the government's direct control.
Point of View
But the composition of the risks S&P identifies is uncomfortable: this is not a demand-side slowdown that monetary policy can easily address. Energy pass-through inflation, a monsoon deficit, and fertiliser-driven food price pressure are supply shocks — and hiking rates to defend the rupee could squeeze growth further without fixing the underlying problem. The real stress test will come if the Strait of Hormuz disruptions persist beyond S&P's optimistic second-half easing assumption. India's current account arithmetic looks manageable only if oil prices cooperate.
NationPress
24 Jun 2026
Frequently Asked Questions
What is S&P Global Ratings' GDP forecast for India in FY27?
S&P Global Ratings has projected India's real GDP growth at 6.6 per cent in FY27. The forecast factors in energy market stress, a below-par monsoon outlook, and slowing global growth as the main drags.
Why is India's consumer inflation expected to rise to 5.1 per cent?
According to S&P Global Ratings, manufacturers are passing higher energy costs on to consumers, and recent administered price increases for petrol, diesel, and cooking gas are adding further pressure. Energy stress alone could push inflation 0.5–0.6 percentage points higher in the third quarter.
Is the Reserve Bank of India expected to hike interest rates?
S&P Global Ratings has forecast a policy rate hike in the second half of the year. The agency cited a rising current account deficit and a weakening rupee as factors driving that expectation.
How does the Middle East conflict affect India's economy?
Disruptions linked to the Middle East conflict have elevated global oil prices and raised input costs across supply chains. For India, this translates into higher energy import costs, upward pressure on fuel and fertiliser prices, and broader inflationary risk — all of which weigh on growth and the current account.
When will global oil prices return to normal, according to S&P?
S&P's baseline scenario assumes Strait of Hormuz disruptions will gradually ease in the second half of the year, with oil prices expected to return to pre-crisis levels only in early 2028. Until then, elevated energy costs remain a persistent headwind for India.
