India's GDP to grow 6.4% in FY27, fastest among G-20 nations: Moody's
The global rating agency said steady economic growth will create a solid base for financial stability and support credit demand across sectors.
India’s economy is expected to stay on a strong growth path over the next financial year. Moody’s has projected that India’s real GDP will grow 6.4% in FY2026–27, making it the fastest-growing economy among G-20 countries.
The global rating agency said steady economic growth will create a solid base for financial stability and support credit demand across sectors.
STRONG GROWTH OUTLOOK FOR FY27
Moody’s said India’s economic expansion will be supported by steady domestic demand, improving investment activity and stable macroeconomic conditions. These factors are expected to lift business confidence and encourage companies to borrow and invest.
Structural reforms are also expected to play a key role. Measures such as the rationalisation of the goods and services tax and income tax cuts are likely to support domestic consumption. At the same time, a stable monetary policy stance should help keep financial conditions supportive.
RBI RAISES NEAR-TERM PROJECTIONS
The Reserve Bank of India (RBI) has also sounded optimistic about growth. In its latest Monetary Policy Committee review, the central bank raised its early growth estimates for FY2026–27.
The RBI now expects real GDP to grow 6.9% in the first quarter and 7.0% in the second quarter, higher than its earlier forecasts of 6.7% and 6.8%. It said economic activity is likely to remain resilient, backed by continued strength in consumption and investment.
IMPACT ON BANKS AND CREDIT DEMAND
According to Moody’s, a strong economy should keep financial conditions broadly steady over the next 12 to 18 months. Asset quality indicators are expected to remain stable, while corporate balance sheets are seen as resilient.
This environment gives banks and lenders room to maintain healthy capital buffers through their earnings, even as demand for credit increases. The agency expects credit growth to move in line with economic activity, supported by stable profitability across the financial system.
Liquidity conditions are also likely to improve, with deposit growth broadly matching the pace of loan demand.
AREAS OF CAUTION REMAIN
Despite the positive outlook, Moody’s flagged some areas of risk. Retail credit trends are expected to remain stable, especially among prime borrowers, but performance may differ depending on lenders’ underwriting standards and customer profiles.
The agency added that operating conditions for micro, small and medium enterprises linked to exports could gradually improve after a trade agreement between India and the United States in February 2026. This deal is expected to reduce the risk of stress in that segment.
However, competition for deposits is likely to increase, which could create challenges for banks trying to expand their low-cost funding sources.
India’s economy is expected to stay on a strong growth path over the next financial year. Moody’s has projected that India’s real GDP will grow 6.4% in FY2026–27, making it the fastest-growing economy among G-20 countries.
The global rating agency said steady economic growth will create a solid base for financial stability and support credit demand across sectors.
STRONG GROWTH OUTLOOK FOR FY27
Moody’s said India’s economic expansion will be supported by steady domestic demand, improving investment activity and stable macroeconomic conditions. These factors are expected to lift business confidence and encourage companies to borrow and invest.
Structural reforms are also expected to play a key role. Measures such as the rationalisation of the goods and services tax and income tax cuts are likely to support domestic consumption. At the same time, a stable monetary policy stance should help keep financial conditions supportive.
RBI RAISES NEAR-TERM PROJECTIONS
The Reserve Bank of India (RBI) has also sounded optimistic about growth. In its latest Monetary Policy Committee review, the central bank raised its early growth estimates for FY2026–27.
The RBI now expects real GDP to grow 6.9% in the first quarter and 7.0% in the second quarter, higher than its earlier forecasts of 6.7% and 6.8%. It said economic activity is likely to remain resilient, backed by continued strength in consumption and investment.
IMPACT ON BANKS AND CREDIT DEMAND
According to Moody’s, a strong economy should keep financial conditions broadly steady over the next 12 to 18 months. Asset quality indicators are expected to remain stable, while corporate balance sheets are seen as resilient.
This environment gives banks and lenders room to maintain healthy capital buffers through their earnings, even as demand for credit increases. The agency expects credit growth to move in line with economic activity, supported by stable profitability across the financial system.
Liquidity conditions are also likely to improve, with deposit growth broadly matching the pace of loan demand.
AREAS OF CAUTION REMAIN
Despite the positive outlook, Moody’s flagged some areas of risk. Retail credit trends are expected to remain stable, especially among prime borrowers, but performance may differ depending on lenders’ underwriting standards and customer profiles.
The agency added that operating conditions for micro, small and medium enterprises linked to exports could gradually improve after a trade agreement between India and the United States in February 2026. This deal is expected to reduce the risk of stress in that segment.
However, competition for deposits is likely to increase, which could create challenges for banks trying to expand their low-cost funding sources.