India's GDP Growth to Stay Robust at 6.7% in FY27, Says Crisil Report

Monetary and fiscal policies provided cyclical support, while benign crude oil prices and above-normal monsoons created some upside to growth.

According to Crisil, the Indian economy has performed far better than expected in fiscal 2026, driven by a stronger-than-expected surge in domestic demand and a softer-than-expected impact on India's exports given the frontrunning of exports to the US in anticipation of higher tariffs in the first four months of fiscal 2026.

Between April and July, merchandise exports to the US rose 20.8 per cent, outpacing the 10.7 per cent growth in the same period last year.

"Monetary and fiscal policies provided cyclical support, while benign crude oil prices and above-normal monsoons created some upside to growth. However, nominal GDP growth has slowed this year, impacted by a low GDP deflator, given the drop in CPI and WPI inflation," the Crisil report read.

This trend, according to the Crisil report, is set to reverse in fiscal 2027, with projected higher nominal GDP growth and lower real GDP growth.

Despite this, real growth is expected to remain above the long-term trend.

Three factors are expected to weigh on growth in fiscal 2027 relative to fiscal 2026.

First, the trade environment is expected to remain challenging, with the World Trade Organisation expecting global trade growth to slow sharply in calendar year 2026, despite steady global GDP growth. It expects global trade volume growth to slow to 0.5 per cent from 2.4 per cent in 2025.

Second, the fiscal support that fuelled growth in the post-pandemic years is expected to moderate in the upcoming fiscal given fiscal consolidation and debt reduction targets.

Third, the support from statistical factors--the low base in the first two quarters of fiscal 2025 and a low deflator--that benefitted growth this fiscal will wane. CPI- and WPI-linked inflation is expected to pick up in fiscal 2027.

The GST rationalisation will boost consumption next fiscal as well. Direct benefit transfers will support consumption as well, particulary since the recipients of these benefits tend to have a higher marginal propensity to consume, the report has asserted.

"The transmission of a 125-basis point cut in policy rates in 2025 is expected to continue next fiscal, which will provide an upside to growth as the peak impact of monetary policy is typically seen with a lag. Healthy balance sheets of banks and corporates, along with the lower borrowing costs, will create favourable conditions for private investments."

The trajectory of the southwest monsoon and a trade deal between India and the US are the key monitorables.

"India and the US are in the midst of negotiating a trade deal, which may provide some relief through tariff rate reduction and improve market access for specific industries, which can provide some upside to Indian exports next fiscal if finalised soon," the report concluded.

- ANI