A season of upgrades: IMF latest to raise India’s growth forecast to 7%

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India's economic growth outlook has strengthened considerably over recent months, with domestic and international institutions raising their forecasts for the current financial year, despite elevated global energy prices and geopolitical uncertainty.

The International Monetary Fund (IMF) was the latest to raise its estimate on October 13, projecting India's economy to expand by 7 percent in FY27, up from its earlier forecast of 6.4 per cent. The revision follows stronger-than-expected domestic demand and services activity, which have helped offset the impact of global disruptions, the Washington-based lender said.

Seven of the eight forecasters, including the Reserve Bank of India (RBI), World Bank, Asian Development Bank (ADB) and major rating agencies, now expect growth of at least 7 percent in FY27. Fitch Ratings, at 6.9 percent, is the only exception.

An analysis of the eight institutions' forecasts shows their average growth projection has risen to 7 percent from about 6.5 percent earlier. Revisions range from 40 basis points to 100 basis points, indicating a broad reassessment of India's ability to withstand external shocks.

The upgrades follow India's stronger-than-expected performance in the April-June quarter, when GDP expanded 7.8 percent, supported by manufacturing, investment and services.

Stronger investment and domestic demand drive upgrades

The upward revisions reflect a common theme across institutions. India's domestic growth drivers have proved more resilient than initially anticipated.

The World Bank raised its FY27 growth forecast by 50 basis points to 7.1 percent from 6.6 percent, citing resilient domestic consumption, robust industrial activity and stronger exports. It also highlighted artificial intelligence's potential to improve productivity and sustain longer-term growth.

The ADB raised its estimate to 7 percent from 6.6 percent, supported by stronger investment demand and resilient services exports. Gross fixed capital formation expanded 11.9 percent in the June quarter, while services grew 10 percent and manufacturing 9.2 percent, reinforcing expectations of sustained domestic momentum, it noted.

Similarly, the OECD made one of the largest revisions, raising its FY27 growth forecast by 80 basis points to 7.1 percent. It pointed to resilient domestic demand and government measures that helped households and businesses absorb the impact of higher energy prices.

The RBI also upgraded its FY27 forecast to 7.1 percent from 6.7 percent at its October monetary policy review, reflecting stronger consumption, investment and economic activity than previously estimated.

Rating agencies see greater resilience to external shocks

Among rating agencies, Moody's Ratings made the largest revision, increasing its FY27 growth forecast by a full percentage point to 7 percent from 6 percent. It attributed the upgrade to stronger economic momentum and resilience despite disruptions from the Middle East conflict.

S&P Global Ratings raised its forecast to 7 percent from 6.6 percent, citing industrial activity, healthy consumption, goods exports and accelerating government capital expenditure.

Fitch Ratings raised its forecast by 50 basis points to 6.9 percent, citing stronger-than-expected economic activity and resilience to higher energy prices. Fitch expects fixed investment to rise 10.6 percent in FY27, up from 8 percent the previous year.

FY28 outlook points to resilient growth, uneven momentum

Despite widespread upgrades for FY27, projections for FY28 present a more mixed picture, with some institutions expecting growth to moderate as higher inflation, borrowing costs, and global uncertainties affect demand.

The IMF raised its FY28 forecast to 7 percent from 6.7 percent, suggesting that the current year's stronger momentum could extend into the following financial year.

The World Bank expects growth to accelerate slightly to 7.2 percent in FY28, while the ADB projects 7.1 percent, having reduced its earlier estimate of 7.3 percent because of the higher growth base in FY27.

The OECD expects a sharper moderation to 6.5 percent in FY28, although this is marginally higher than its earlier projection of 6.4 percent. Fitch Ratings also expects growth to ease to 6.5 percent. Inflation and energy prices remain key risks.

India's retail inflation rose to 5.54 percent in September, while the RBI recently raised its FY27 inflation forecast to 5.2 percent from 5 percent. Higher food prices, elevated crude oil costs and an adverse monsoon could reduce household purchasing power and weaken consumption.