India’s economic growth is projected to be 7.1% in fiscal year 2027, according to a new report by Crisil Intelligence, though the outlook is tempered by potential downside risks stemming from the ongoing conflict in West Asia.
The Crisil report, released Wednesday, anticipates a moderation in India’s real GDP growth from current levels, but still characterizes the 7.1% projection as “healthy and slightly above potential.” This growth is expected to be driven by robust private consumption and a gradual increase in private investment, with sentiment improving as a recovery in private capital expenditure gains momentum, particularly in emerging sectors.
Export growth is also forecast to continue, benefiting from comparatively lower US tariffs relative to fiscal year 2026, steady global economic expansion and strong performance in the services export sector, even as the initial benefits of frontloading begin to diminish.
However, the report highlights the West Asia conflict as a key risk factor. Prolonged instability in the region could negatively impact India’s economy through increased crude oil and commodity prices. Crisil expects retail inflation to rise to an average of 4.3% in fiscal year 2027, up from an estimated 2.5% in fiscal year 2026.
Despite the projected increase in inflation, Crisil anticipates that food prices will remain relatively stable, assuming a normal monsoon season in 2026. The report notes that the reduced weight of food in the new CPI 2024 series should help to limit the overall increase in headline inflation. Headline retail inflation is expected to remain near the midpoint of the Reserve Bank of India’s (RBI) tolerance band.
This outlook suggests the RBI will likely maintain its current repo rate and focus on transmitting the 125 basis points rate cut implemented throughout calendar year 2025. Crisil forecasts that policy rates will remain steady in fiscal year 2027, with the cumulative rate cut continuing to filter through to bank lending and deposit rates.
The report also anticipates proactive liquidity management by the RBI, expecting financial conditions to remain resilient in fiscal year 2027, supported by a favorable monetary policy and strong macroeconomic fundamentals. India’s power demand in February reached a 15-year high, driven by rising temperatures and increased electricity consumption, according to separate data from Crisil.
