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India to Lead G20 Growth at 6.4% in FY27, Driven by Strong Consumption

Moody's Ratings projects India's real GDP will expand by 6.4% in fiscal 2026-27, making it the fastest-growing economy among G20 nations. This growth is expected to be driven by robust domestic consumption, supported by policy measures like GST rationalization and higher income tax thresholds. The report also indicates a strong operating environment for banks, with healthy loan growth and corporate loan quality. However, this forecast is lower than the 6.8-7.2% range projected in the Finance Ministry's Economic Survey.

Key Points: India GDP to Grow 6.4% in FY27, Fastest in G20: Moody's

  • Forecast 6.4% GDP growth in FY27
  • Strong domestic consumption and policy drivers
  • Banking system outlook remains favourable
  • GST rationalization to boost affordability
2 min read

India's GDP likely to grow 6.4 pc in FY27, fastest among G20 economies: Report

Moody's report forecasts India as the fastest-growing G20 economy in FY27 at 6.4%, fueled by domestic consumption, GST rationalization, and strong banking.

"The rationalisation of the goods and services tax (GST) in September 2025... will help improve affordability for consumers and support consumption-led growth - Moody's Ratings"

New Delhi, Feb 9

India's real gross domestic product is likely to expand 6.4 per cent in fiscal 2026‑27 -- the fastest among G20 economies -- driven by strong domestic consumption and policy measures, a new report has said.

The report from Moody's Ratings said the country's banking system outlook remains broadly favourable amid sufficient reserves to absorb loan losses.

The operating environment for banks will remain strong in 2026, supported by robust macroeconomic conditions and structural reforms, it said.

"The rationalisation of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth," the global brokerage mentioned.

It expects the Reserve Bank of India (RBI) to ease policy further in 2026‑27 only if there are clear signs of a slowdown in activity, adding that inflation remaining under control would allow the central bank flexibility.

The report forecasts system-wide loan growth to reach 11.13 per cent in FY27, from 10.6 per cent in FY26 (year-to-date), adding that corporate loan quality should stay healthy, supported by stronger balance sheets and improved profitability among large firms.

"Recoveries will taper as banks have resolved stressed loans to large corporate," the report said.

The estimates from ratings agency on FY27 growth is lower than the 6.8-7.2 per cent range projected in the Finance Ministry's Economic Survey. According to official estimates growth for the current fiscal is expected to touch 7.4 per cent.

The ratings agency had earlier said in a report that decrease in effective GST rates, however, could enhance private consumption and support India's economic growth.

The RBI Monetary Policy Committee (MPC), in its first policy review of 2026, kept the repo rate unchanged at 5.25 per cent.

Analysts said that RBI's decision to keep the policy rate unchanged reflected a favourable assessment of growth and inflation dynamics.

The RBI is expected to maintain an extended pause, due to positive cyclical upswing and confidence from successful conclusion of multiple trade deals, they added.

- IANS

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Reader Comments

P
Priya S
Good to see the banking system is stable. That's very important for the common person. But I respectfully hope the government ensures this growth is inclusive. The benefits must reach the middle class and small businesses, not just large corporations.
R
Rohit P
Moody's forecast is lower than our own Economic Survey's projection. Why is the international agency more conservative? We should trust our own data and institutions. The RBI keeping rates steady shows confidence in our domestic situation.
S
Sarah B
As someone working in the finance sector, the news about corporate loan quality and strong bank balance sheets is very reassuring. It creates a solid foundation for sustained growth. The key now is maintaining inflation control to give RBI flexibility.
K
Karthik V
Strong numbers, but the real test is on the ground. We hear about GDP growth, but are vegetable prices coming down? Is it easier to get a home loan? That's what matters to my family in Bangalore. Hope the 'consumption-led growth' means more money in our pockets.
M
Michael C
The structural reforms mentioned seem to be paying off. India's economic resilience is impressive on the global stage. The successful trade deals are a big plus. Interested to see how this projected growth compares to China's pace in the same period.

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