GDP Growth

Strong domestic demand, export diversification in response to US tariffs, and continued infrastructure spending will help India maintain its position as the world’s fastest-growing major economy over the next few years.

India’s GDP is expected to sustain a 6.5% growth rate through 2027, compared with a projected 6.4% in 2026 and 7% in 2025, Moody’s Ratings said in its Global Macro Outlook 2026–27 released on Thursday.

According to Moody’s, government-led capital expenditure and resilient household consumption will remain key growth drivers, even as private sector investment stays subdued.

“We expect Brazil and India — the fastest-growing G-20 economies — to grow at 2.0% and 6.5%, respectively, through 2027, supported by domestic and export diversification. India’s economic performance is underpinned by strong infrastructure spending and solid consumption, although business capex remains cautious,” the agency noted.

The report highlights how Indian exporters have adapted to evolving trade dynamics amid steep US tariffs.

“Despite 50% tariffs on select Indian goods, exporters have managed to redirect shipments — overall exports rose 6.75% in September even as exports to the US fell 11.9%,” Moody’s said.

The agency expects India to grow around 6.5% in 2026 and 2027, supported by a neutral-to-easy monetary policy stance and low inflation. Strong global investor sentiment has also cushioned external risks.

Moody’s outlook comes against a volatile global backdrop marked by diverging monetary policies, tariff tensions, and shifting trade alliances intensified by US President Donald Trump’s trade war.

Global GDP growth is forecast to slow to 2.5%–2.6% in 2026 and 2027 from 2.9% in 2024, with emerging markets continuing to outpace advanced economies.

The RBI projects India’s growth at 6.8% in FY26, while the finance ministry has estimated a 6.3%–6.8% range.

The US has imposed tariffs of up to 50% — including a 25% levy linked to India’s purchase of Russian oil — on certain steel, aluminium, and manufactured products. India has avoided retaliation, focusing instead on market diversification and trade negotiations with the EU and other partners.

The Moody’s report also noted that the RBI’s policy stance remains neutral-to-easy as inflation moderates. Retail inflation dropped to a record 0.25% in October from 1.54% in September amid broad easing in food and fuel prices.

The central bank has gradually shifted from tightening to easing over the past two years, delivering three rate cuts in 2025 — 25 bps each in February and April, followed by a 50 bps cut in June.

“Bond yields in major emerging economies have remained stable, supported by stronger inflation-targeting frameworks and deeper domestic markets,” Moody’s said. However, it warned that global bond markets remain fragile and highly sensitive to fiscal risks and geopolitical shifts.