Moody’s rating on Friday upped India’s growth forecast to 7 per cent for the current fiscal from 6 per cent. However, it said that risks on account of West Asia crisis and El Nino could push the inflation and further widen the current account deficit.

This observation has been given after review by a rating committee on September 10. It reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments.

India has ‘Baa3’ with stable outlook rating from Moody’s.

In a statement, the rating agency said India’s real GDP growth accelerated to 8.2 per cent year-over-year in the first six months of calendar year (CY) 2026, up from 7.3 per cent for the full year in CY 2025, supported by stronger private consumption, robust gross fixed capital formation that reflects continued public infrastructure spending and a likely revival of private sector investment, and sustained strength in the services sector.

“The economy’s demonstrated resilience to the global shock wrought by the conflict in the Middle East has driven an upward revision to our forecast for real GDP growth in fiscal 2026-27 (year ending March 2027) to 7 per cent from 6 per cent previously,” it said while adding that it continues to expect India to grow faster than all other G-20 economies, as well as similarly rated emerging market sovereigns.

However, risks remain, the agency said. West Asia crisis along with El Nino likely to push inflation. Looking ahead, “in the absence of an enduring resolution to the

conflict in the Middle East, elevated energy prices could push annual average inflation beyond our projection of 4.8 per cent for fiscal 2026-27, which is already significantly higher than the 2.4 per cent outturn in fiscal 2025-26, while El Niño-related disruptions could increase food price pressures, weighing on private consumption and economic activity,” the agency said.

Also, while the increased diversification of India’s crude import sources, sizeable foreign exchange reserves and strong domestic demand provide important buffers, “higher energy and fertilizer import costs, softer external demand and weaker remittance inflows from the Middle East could widen the current account deficit and weigh on growth momentum more broadly,” the agency said.

On the stable outlook, the agency said it incorporates India’s gradually improving fiscal metrics and resilient growth prospects relative to peers. However, fiscal accommodation amid an uncertain global macroeconomic outlook, including revenue-eroding measures, could slow progress toward more meaningful debt reduction and worsen already weak debt affordability.

“Upward pressure on the rating would develop if there was a material improvement in the affordability of India’s high debt burden to ratios more consistent with higher-rated peers,” the agency cautioned. This would likely entail fiscal measures that durably raise revenue, narrow the fiscal deficit and contribute to a more marked decline in debt.

The effective implementation of structural reforms that result in a significant pickup in private sector investment, faster growth in GDP per capita and broader economic diversification, for instance in higher value-added manufacturing or digital services, would support stronger assessments of policy effectivenes sand the credit profile.

Conversely, downward pressure on the rating would stem from durably weaker growth than currently projected or a reversal of recent gains from fiscal consolidation, which would materially increase debt and significantly worsen debt affordability. In addition, “a resurgence of financial sector stress that is unlikely to be addressed promptly and effectively would also put downward pressure on the rating,” the agency concluded.

Published on September 18, 2026